Gold Price Forecast: XAUUSD weakens below $1,700, looks vulnerable near 1-year low

• The price of gold witnesses sales for the second day in a row and falls to its lowest level in almost a year.
• The prospect of further rises in interest rates continued to drive money flows away from the yellow metal.
• The risk-positive tone exerts additional pressure; the modest weakness of the dollar is not supportive.

The price of Prayed is extending momentum after the previous day’s breakout of the $1,700 level and continues to lose ground for the second day in a row on Thursday. The downward movement drags the XAUUSD at its lowest level since August 2021, around the region of $1,689-$1,688 at the start of the European session.

Gold price weighed down by hawkish central banks

The prospects for more interest rate hikes by major central banks they turned out to be a key factor that helped drive money flows away from non-yielding gold. The European Central Bank is ready to raise interest rates for the first time since 2011 Thursday. A Reuters story earlier this week indicated that policymakers may discuss a 50 basis point rate hike to tackle rising inflation. Also the Federal Reserve is expected to raise rates by another 75 basis points at its monetary policy meeting on July 26-27.

The Governor of the Bank of England, Andrew Bailey also raised the possibility of raising interest rates by 50 basis points in August and said that the central bank’s absolute priority is to bring inflation back to 2%. On the other hand, Reserve Bank of Australia policy meeting minutes, released Tuesday, revealed further hikes will be needed of interest rates to bring inflation back to target over time. This, in turn, continued to weigh on the price of gold, which does not pay interest.

Risk-positive tone exerted additional pressure

The recent recovery in global risk sentiment Another factor was considered that weighed on the price of gold. Investors have been lowering expectations of a 100 basis point Fed rate hike in July. Apart of this, the resumption of Russian gas supply through the Nord Stream 1 pipeline helped ease fears about a potential recession and boosted investor confidence. This was reflected in a generally positive tone around equity markets, which tends to reduce demand for traditional safe-haven assets such as gold.

The weakness of the dollar did not serve as support

The US dollar had a hard time taking advantage of the previous day’s bounce from its lowest level since July and was met with fresh selling amid diminishing odds of a more aggressive tightening of monetary policy by the Fed. However, the weakening dollar did not support commodities. premiums denominated in dollars did not stop the current decline. This, in turn, suggests that the path of least resistance for the price of gold is to the downside and any recovery attempts could still be seen as a selling opportunity.

Gold Price Technical Outlook

The gold price has found acceptance below the $1,700 level and looks vulnerable to further decline. A follow up of selling below the low of August 2021, around the region of $1,687-$1,686would reaffirm the negative bias and drag XAUUSD into the trading zone. $1,677-$1,676. The latter represents the minimum of the year 2021 and is followed by the horizontal support of the $1,670below which the yellow metal is likely to extend its bearish trajectory.

On the other hand, any significant recovery beyond the level of $1,700 will likely attract new sellers and remain capped near the resistance zone of $1,710-$1,712. The next major obstacle is located near the landing zone. $1,725-$1,726, which if exceeded could trigger a short-covering move. The price of gold could try to overcome the horizontal resistance of $1,734-$1,735 and test the strong barrier of $1,749-$1,752.