Gold Price Forecast: XAU/USD Remains Vulnerable Amid Rate Hike Expectations

• Gold extends its sideways consolidation move for the third day in a row on Thursday.
• Expectations of an aggressive Fed rate hike and high US bond yields act as a headwind for the yellow metal.
• Recession fears are weighing on investor sentiment and helping to limit the fall in gold prices.

The price of gold (XAU/USD) continues its fight to gain any significant traction and extends its consolidation movement for the third consecutive day Thursday. XAU/USD remains trapped in a tight range during the early part of the European session and is now trading just below the $1,815 level.

Bullish comments from Fed Chairman Jerome Powell on Tuesday reaffirmed market expectations for a more aggressive tightening of US central bank monetary policy. In his speech at a Wall Street Journal event, Powell said he will support interest rate hikes until prices begin to fall to a healthy level.. The Fed’s determination to fight inflation continued to support elevated US Treasury yields and proved to be a key factor acting as a headwind for non-yielding gold.

However, the fall is still cushioned by concern that global economic growth will softenwhich continues to weigh on investor sentiment and should benefit safe haven XAU/USD. Prospects for more aggressive Fed tightening, coupled with the Russia-Ukraine war and prolonged COVID-19 lockdowns in China, have fueled recession fears. Apart of this, a modest rebound in the US dollar offered additional support to the price of golddenominated in dollars, at least for the time being.

The mixed fundamentals prevented investors from taking aggressive positions in gold, which, in turn, has led to moderate price movements in the last three sessions. From a technical point of view, the recent bounce from the lowest level since late January, reached earlier this week, teetered near the important 200-day SMA on Tuesday. Besides, gold’s inability to attract significant buyers suggests the path of least resistance is to the downside.

Market participants now await the US economic calendar, in which the Philadelphia Fed manufacturing index, the usual weekly initial jobless claims and existing home sales data will be released. In addition, US bond yields will influence the price dynamics of the dollar and give gold some momentum. On the other hand, investors will also be guided by the general market risk sentiment to take advantage of short-term opportunities.

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