Gold price remains under some selling pressure for the second straight day on Wednesday and extends the overnight pullback from the $1,914-$1,915 area or its highest level since early February. The intraday downfall remains uninterrupted through the first half of the European session and drags the XAU/USD to a two-day low, around the $1,885 region in the last hour.
Hawkish Federal Reserve Expectations Exert Pressure On Gold Price
Despite concerns over a banking crisis in the United States (US), investors seem convinced that the Federal Reserve (Fed) might still go ahead with a more minor 25 basis point (bps) rate hike at its upcoming policy meeting on March 21-22. The latest US Consumer Price Index (CPI) report released on Tuesday lifted the bets, which showed that inflation isn’t coming down quite as fast as hoped. This, in turn, is seen as a key factor weighing on the non-yielding Gold price.
Rising US Bond Yields, Stronger US Dollar Further Weigh On Gold Price
The prospect for further policy tightening by the Fed is reinforced by the ongoing rally in the US Treasury bond yields, which, in turn, lends support to the US Dollar (USD). This further contributes to driving flows away from the non-yielding Gold price. Apart from this, amid easing fears about a broader systemic crisis from the sudden collapse of Silicon Valley Bank (SVB), a generally positive risk tone is seen denting demand for the safe-haven precious metal.
Bets For More Rate Hikes By Other Major Central Banks Favour Bearish Traders
The markets, meanwhile, have been pricing in the possibility of additional jumbo interest rate hikes by the European Central Bank (ECB) beyond the March meeting, due on Thursday. Moreover, the Bank of England (BoE) is also anticipated to stick to its rate-hiking cycle next week. This, in turn, suggests that the recent recovery in Gold prices from the vicinity of the 100-day Simple Moving Average (SMA) might have run its course and favored bearish traders.
Traders Look To Macro Data From the United States For Some Impetus
That said, waiting for some follow-through will still be prudent to sell below the $1,880 resistance breakpoint turned support before positioning for any further losses. Traders now look to the US economic docket, featuring the Producer Price Index (PPI) release, monthly Retail Sales figures, and the Empire State Manufacturing Index. This, along with the US bond yields, the USD price dynamics, and the broader risk sentiment, should provide a fresh impetus.
Gold Price Technical Outlook
From a technical perspective, the resistance-turned-support above near the $1,880 level should protect the immediate downside for Gold price. A convincing break below might prompt technical selling and drag the XAU/USD toward the next relevant support near the $1,856-$1,855 zone. Some follow-through selling will expose the 100-day SMA support, currently around the $1,817 region, which, if broken decisively, will be seen as a new trigger for bearish traders.
On the flip side, the weekly swing high, around the $1,914-$1,915 region, now seems to be an immediate strong resistance. Bulls might now wait for a sustained move beyond the said barrier before positioning for the resumption of the recent upward trajectory witnessed over the past week or so. The Gold price might then accelerate the momentum towards retesting the ten-month peak, around the $1,959-$1,960 region touched in February.