- Gold extends its losses to two-consecutive days, down some 0.39%.
- Fed speakers are “comfortable” with 50-bps rate hikes in the next couple of meetings.
- XAU/USD is accelerating towards the 200-DMA, which, once broken, might send gold prices towards $1800.
- Gold Price Forecast (XAU/USD): It is neutral-downward biased, and a break below the 200-DMA might push prices towards $1800.
Gold spot (XAU/USD) slides for the second straight, despite a shift to a favorable market mood, amidst increasing bets that Fed tightening could spur a recession. At the time of writing, the yellow metal is trading at $1847.05 a troy ounce in the North American session.
Global equities record gains, illustrating investors’ sentiment. The greenback is gaining, though it has not been able to weigh on the non-yielding metal, which is benefitting from falling US Treasury yields, led by the 10-year down eight basis points, back below the 3% threshold, sitting at 2.965%.
Nevertheless, even though stocks are trading in the green, investors must be careful about China’s zero-tolerance Covid-19 restrictions, alongside Ukraine-Russia tussles, which would likely shift sentiment to negative, putting a lid on recent gains.
Fed members expect two 50-bps increases in back-to-back meetings
Meanwhile, after the Fed announced its monetary policy on Wednesday, the Fed parade of speakers continued. On Tuesday, the New York Fed President John Williams said that the Fed needs to be data-dependent and adjust policy according to those circumstances. He added that 50-bps rate hikes at the next two meetings “makes sense” as a base case. Late in the day, Richmond Fed President Thomas Barkin stated that 50-bps hikes are on the table and added that inflation is high, persistent, and broad-based. However, it emphasized that demand is strong and looks to remain robust, driven by healthy business and personal balance sheets.
Later, Cleveland’s Fed President Loretta Mester, a voter in 2022, said that the Fed needs to move rates up to at a pace to get inflation down while adding that she is comfortable with 50-bps increases in “a couple of meetings.” Mester said that if inflation does not get under control, the Fed would need to go beyond neutral, and added that the board would not rule out 75-bps hikes, forever.
On Tuesday, the US economic docket would feature additional Fed speakers, with Neil Kashkari and Christopher Waller crossing the wires. Data-wise, US inflation figures would be unveiled on Wednesday, followed by prices paid by producers on Thursday and Consumer Sentiment on Friday.
Gold Price Forecast (XAU/USD): Technical outlook
XAU/USD’s still neutral biased, though the closer it gets to the 200-day moving average (DMA) at $1836.19, the possibilities to turn neutral-bearish increases. As of writing, the 50 and the 100-DMAs lie above the spot price, and once XAU/USD bears clear the $1890 support level, a move towards the 200-DMA and beyond is on the cards.
With that said, the XAU/USD’s first support would be May 3, a daily low at around $1850.34. Break below would expose the abovementioned 200-DMA at $1836.19, closely followed by a four-year-old upslope trendline near the $1815-25 region. Once cleared, XAU/USD’s bears’ next target would be $1800.