Gold Forecast: XAU/USD looks vulnerable near two-week lows, focus on US PCE.

• Gold weakens near a two-week low amid prospects for aggressive Fed rate hikes.
• Recession fears, falling US bond yields and modest dollar weakness offer some support.
• Recent repeated failures near the 200-day SMA support the prospect of further losses.

The Prayed it trades with a slight negative bias for the fourth day in a row on Thursday and is weakening near a two-week low hit the day before. XAU/USD is now hovering the area of ​​$1,815 and is under pressure from the prospect of more aggressive rate hikes from the Fed.

Speaking at the ECB’s annual forum on Wednesday, Powell said the US economy is well positioned to handle tighter monetary policy. and that the US central bank remains focused on getting inflation under control. For her part, the president of the Cleveland Fed, Loretta Mester, affirmed that those responsible for economic policy must act decisively to curb price pressures. This, in turn, was seen as a key factor that continued to act as a headwind for non-yielding gold.

That said, a combination of factors prevented traders from opening aggressive bearish positions and capping any deeper losses for XAU/USD, at least for now. Despite the dovish outlook around the Fed, the US dollar struggled to capitalize on its positive two-day trend amid continuing declines in US Treasury yields. This, along with the state of risk aversionoffered some support to safe-haven gold amid fears of a recession.

Market sentiment remains fragile amid the concern that rapidly rising interest rates and tightening financial conditions will challenge global economic growth. This continued to weigh on investor sentiment, which was reflected in a sea of ​​red in equity markets and underpinned traditional haven assets.

The mixed fundamental background warrants some caution before positioning for any further downside moves, via the technical setup favoring the bears. Recent recovery attempts have repeatedly faced rejection near the important 200-day SMA and suggest that the downward trend in gold prices may still be far from over.

Market participants now await the US economic docket, in which the core PCE price index (the Fed’s preferred gauge of inflation) and the usual weekly initial jobless claims will be released. This, along with US bond yields, will influence the price dynamics of the dollar. Additionally, broader risk sentiment could give gold a further boost.

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