Gold Price Forecast: XAU/USD touches its lowest level since January near $1,830, remains vulnerable

• The price of gold weakens near its lowest level since January amid sustained buying of the US dollar.
• US CPI on Tuesday reaffirms the Fed’s hawkish outlook and benefits the dollar.
• Fears of a recession weigh on investor sentiment and could provide some support for the gold price.

The price of gold (XAU/USD) is under selling pressure again on Wednesday and remains defensive during the European session. XAU/USD is currently sitting around the $1,835 level, flirting with its lowest level since January 6and looks vulnerable to further decline.

The strength of the dollar moves money flows away from the price of gold

The US dollar (USD) remains near a multi-week high amid expectations that the Federal Reserve (Fed) will maintain its hawkish stance in the wake of stubbornly high inflation. This, in turn, is seen as a key factor driving flows away from the dollar-denominated price of gold. Market expectations that interest rates will continue to rise for longer were bolstered by data showing the overall US Consumer Price Index (CPI) rose 0.5% in January, in line with expectations. In annualized terms, the US CPI fell from 6.5% to 6.4% during the reported month, although it remained above consensus estimates, which placed it at 6.2%. More importantly, the core CPI, which excludes food and energy prices, was also higher than expected, with a year-on-year rate of 5.6%.

The aggressive stance of Federal Reserve officials weighs even more on the price of gold

In addition, FOMC members insisted on the need to continue raising rates gradually to beat inflation. In fact, Richmond Fed President Thomas Barkin told Bloomberg TV that inflation is normalizing, but coming down slowly. If it persists at levels well above target, the Fed will have to raise rates to a higher level than anticipatedBarkin added. For her part, the president of the Dallas Fed, Lorie Logan, affirmed that “we must remain prepared to continue raising rates for longer than expected”, to which the president of the New York Fed, John Williams, added that The fight against inflation will continue for the next few months. The markets rushed to discount at least 25 basis points of rise in each of the next two meetings of the Federal Open Market Committee (FOMC), in March and in May.

Recession Fears Could Support Safe Haven XAU/USD

This, in turn, pushes up US Treasury yields, which is considered another factor that benefits the dollar and exerts downward pressure on the price of gold, which does not yield. That being said, the recent inversion of the yield curve exacerbates fears of an impending recession and affects global risk sentiment. Risk-off sentiment is reflected in a weaker tone in equity markets and could support the precious metal, at least for now. However, the fundamental background seems to lean in favor of the bears and suggests that the path of least resistance for XAU/USD is to the downside. The US economic calendar, with monthly retail sales and the Empire State manufacturing index, is in the spotlight.

Gold Price Technical Outlook

From a technical perspective, acceptance below the 50-day SMA adds credibility to the negative outlook and supports the prospects for deeper losses. Furthermore, the oscillators on the daily chart remain in bearish territory and are still far from the oversold area. Therefore, a subsequent slide towards the intermediate support of $1,830on the way to the zone of $1,818-$1,817 and the round level of $1,800It seems like a clear possibility.

On the other hand, the 50-day SMA, currently around the $1,858-$1,859seems to act as an immediate hurdle before the high of the previous day, around the zone of $1,870-$1,871. Any further recovery could be seen as a selling opportunity and risks fading quickly near the price barrier. $1,890. That being said, some continuation buying above the level of $1,900 could trigger some short covering move and push the gold price to the next relevant resistance near the $1,925-$1,930.

Gold Key Levels to Watch