Gold dropped to over a two-month low on Thursday amid sustained USD buying.
Aggressive Fed rate hike bets pushed the USD closer to levels last seen in 2002.
Investors now look forward to the US Core PCE and GDP for a fresh impetus.
last seen in late 2002. This turned out to be a key factor exerting downward pressure on the dollar-denominated commodity.
Apart from this, the prospects for a more aggressive policy tightening by the Fed further contributed to driving flows away from the non-yielding gold. In fact, the US central bank is expected to hike interest rates by 50 bps when it meets on May 3-4, and again in June and July, and ultimately lift rates to around 3.0% by the end of the year. The bets were reaffirmed by hawkish comments by various FOMC members, including Fed Chair Jerome Powell last week. This, along with inflation fears, remained supportive of elevated US Treasury bond yields and underpinned the buck.
Meanwhile, analysts at ANZ Bank argued that escalating geopolitical risk and inflation should continue to underpin investment demand. Adding to this, analysts at TD Securities said: while the yellow metal's prices have remained extremely resilient against an aggressively hawkish Fed, as a protracted war in Ukraine simultaneously raised both geopolitical uncertainty and inflation risks and thereby fueled demand for havens, we see few participants left with an appetite to buy gold. The analysts explained that Comex shorts have largely been wiped out, removing some fuel for price strength, while safe-haven flows have a historical tendency to dissipate.
Also read: Gold Futures: Short-term rebound in store？
Going forward, investors are focusing on some potential economic data, which will have a significant impact on the DXY. The US Bureau of Economic Analysis will report the quarterly Core Personal Consumption Expenditure (PCE) on Thursday, which is likely to print at 5.4%, higher than the prior print of 5%. Apart from this, gold prices and the DXY will get impacted by the release of the Gross Domestic Product (GDP) numbers. The annual GDP is seen at 1.1% against the prior print of 6.9% while the quarterly GDP has room for an upside surprise. A preliminary reading for the quarterly GDP is 7.3% in comparison with the previous figure of 7.1%.
Also read: Gold Price Forecast: XAUUSD needs to hold $1,877 to maintain upward bias – Credit Suisse
Gold technical analysis
On a four-hour scale, XAU/USD is facing barricades near the supply zone placed in a narrow range of $1,890.21-1,895.15. The 20- and 50-period Exponential Moving Averages (EMAs) at $1,905.31 and $1,925.57 respectively are heading south, which adds to the downside filters. Meanwhile, the Relative Strength Index (RSI) (14) is oscillating in a bearish range of 20.00-40.00, which signals more pain ahead.
Gold four-hour chart
As for the longer-term charts, the gold price is headed to a potentially strong area of support:
The weekly chart is homing in on prior support and resistance while the monthly chart sees the gold price already meeting the 61.8% golden ratio.
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