Gold Price Forecast: XAUUSD drops to $1,786-84 support zone as USD hits fresh 20-year high
|- Gold Price continued losing ground for the second straight day and slipped below the $1,800 mark.
- Aggressive Fed rate hike bets, along with a blowout USD rally, exerted pressure on the commodity.
- The prevalent risk-off mood amid growing recession fears could offer support and limit the decline.
Gold Price drifted lower for the second successive day on Tuesday and weakened further below the $1,800 mark during the early North American session. The intraday decline was sponsored by a combination of factors, hawkish Fed expectations and a stronger US dollar, though the prevalent risk-off environment could help limit the downside.
Fed Chair Jerome Powell said last week that the US central bank remains focused on getting inflation under control and added that the US economy is well-positioned to handle tighter policy. This was seen as a key factor that continued acting as a headwind for the non-yielding yellow metal. Apart from this, a blowout USD rally to a fresh two-decade high further contributed to driving flows away from the dollar-denominated gold.
The greenback remained well supported by expectations for more aggressive Fed rate hikes and seemed rather unaffected by a steep decline in the US Treasury bond yields. Concerns about a potential economic recession forced investors to take refuge in traditional safe-haven assets and dragged the yield on the benchmark 10-year US government bond to a fresh multi-week low. This, in turn, could offer some support to gold.
Nevertheless, spot prices have now drifted back closer to the $1,786-$1,784 support zone, which if broken decisively would mark a fresh breakdown. That said, bearish traders might refrain from placing aggressive bets ahead of the FOMC meeting minutes, due on Wednesday. Apart from this, the release of the closely-watched US monthly jobs report (NFP) will influence the USD and determine the near-term trajectory of gold price.
Technical levels to watch
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