Gold Price Forecast: XAU/USD hangs near multi-week lows, around $1,745 ahead of Powell

• Gold struggled to capitalize on its attempted intraday recovery move.
• Hawkish Fed/BoE, rising bond yields acted as a headwind for the metal.
• Resurgent USD demand exerted additional pressure on the commodity.
• Gold Price Forecast: XAU/USD rebounds but not out of the woods yet, Powell in focus

Gold attempted a modest recovery from the overnight slump to the lowest level since August 11, albeit struggled to capitalize on the modest intraday gains. Lingering concerns about the fate of debt-ridden China Evergrande Group tempered investor's appetite for perceived riskier assets. This was evident from a modest pullback in the equity markets, which was seen as a key factor that drove some haven flows towards the precious metal. However, a combination of factors acted as a tailwind for the XAU/USD and kept a lid on any meaningful gains, rather prompted fresh selling at higher levels.

The momentum ran out of steam near the $1,757-58 region amid the prospects for an earlier rate hike move by the Fed and the Bank of England (BoE). The Fed on Wednesday indicated that moderation in the pace of asset purchases may soon be warranted if economic progress continues broadly as expected. Moreover, the so-called dot plot showed a growing inclination to raise interest rates in 2022. Separately, the BoE on Thursday suggested that a modest tightening over the forecast period was likely to be necessary to be consistent with meeting the inflation target sustainably in the medium term.

The repricing of the likely timing of policy tightening by the Fed and the BoE was evident from the ongoing surge in sovereign bond yields. This, in turn, held bulls from placing aggressive bets around the non-yielding yellow metal. In fact, the yield on the benchmark 10-year US government bond registered the biggest rise in months on Thursday and broke through a technically significant 1.40% level for the first time since July. The US bond yields rose further on Friday and helped revive the US dollar demand, which further undermined demand for dollar-denominated commodities, including gold.

Gold has now retreated to the lower boundary of the daily trading range, around the $1,745-45 region, and remains on track to end in the red for the third successive week. Market participants now look forward to scheduled speeches by influential FOMC members, including the Fed Chair Jerome Powell. This, along with the US bond yields, might influence the USD price dynamics and provide some impetus to the XAU/USD. Traders might further take cues from the broader market risk sentiment to grab some short-term opportunities on the last day of the week.

Technical outlook

From a technical perspective, any subsequent decline is likely to find some support near the $1,730-29 horizontal zone. Some follow-through selling will set the stage for deeper losses and drag gold back towards the $1,700 round-figure mark. On the flip side, the daily swing highs, around the $1,757-58 region, now seems to act as an immediate hurdle, above which bulls might aim to challenge the 200-hour barrier, currently near the $1,771-72 zone. Only a sustained move beyond the latter will negate the near-term negative bias and pave the way for some meaningful near-term appreciating move for the metal.

Levels to watch