Gold Price Forecast: XAU/USD Looks Vulnerable Near Multi-Week Lows Amid Rate Hike Nerves

  • Gold falls to a three-week low on Wednesday amid a rebound in demand for the dollar.
  • Expectations of an aggressive rate hike from the Fed cause a further rise in US bond yields and lift the dollar.
  • A modest pullback in equity markets could offer some support for the yellow metal as a safe haven.

The Prayed is again under selling pressure on Wednesday and drops to a three-week low during the first hours of the European session. XAU/USD is currently trading above the $1,640 level and is pressured by a combination of factors.

the growing acceptance that the Fed will continue to tighten monetary policy at a faster pace causes a further rise in US Treasury yields and weighs on the underperforming yellow metal. In fact, the CME’s FedWatch tool indicates a near 100% chance of occurrence. a fourth successive rate hike of 75 basis points at the next FOMC meeting in November. These expectations were confirmed by the US consumer inflation figures, published last week, and by the recent hard-line statements by several Fed officials.

Reiterating the Fed’s commitment to reduce inflation, Minneapolis Fed President Neel Kashkari said Tuesday that the monetary policy rate could rise above 4.75% if core inflation continues to rise. This, in turn, lifted the 2-year yield to a 15-year high and the benchmark 10-year Treasury note to its highest level since 2008, helping the US dollar regain positive traction. The modest strength of the dollar puts additional pressure on gold denominated in dollars.

Having said that, a pullback in US equity futures could be the only factor that could offer some support to the safe-haven XAU/USD. Investors remain concerned about economic difficulties stemming from rapidly rising borrowing costs. Additionally, China’s strict zero covid policy has fueled recession fears and curbed recent bullish movement. However, the fundamental background seems to be leaning in favor of the bears and supports the prospects for further losses.

Therefore, any rally attempts could still be seen as a selling opportunity and risk fading quickly. Market participants now await US housing market data, with the release of building permits and housing starts to gain further momentum at the start of the American session. This, coupled with US bond yields, will boost demand for the dollar and provide some lift to gold. Aside from this, traders will follow signs of broader risk sentiment.

gold technical levels

XAU/USD

Overview
last price today 1641.81
today daily change -10.39
Today Daily variation in % -0.63
Daily opening today 1652.2
Trends
daily SMA20 1669.72
daily SMA50 1705.58
daily SMA100 1746.18
daily SMA200 1817.02
levels
Previous daily high 1660.94
Previous Daily Low 1645.93
Previous Weekly High 1699.96
Previous Weekly Low 1640.23
Previous Monthly High 1735.17
Previous Monthly Low 1614.85
Daily Fibonacci 38.2% 1655.21
Fibonacci 61.8% daily 1651.66
Daily Pivot Point S1 1645.11
Daily Pivot Point S2 1638.01
Daily Pivot Point S3 1630.1
Daily Pivot Point R1 1660.12
Daily Pivot Point R2 1668.03
Daily Pivot Point R3 1675.13

Source: Fx Street

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