Gold Price Forecast: 200-DMA likely to cap XAUUSD ahead of US Retail Sales, Fed’s Powell

• Gold witnessed an intraday turnaround from a fresh multi-month low touched on Monday.
• The USD retreated further from a two-decade high and extended support to the commodity.
• Aggressive Fed rate hike bets, rebounding US bond yields, a positive risk tone capped gains.
• Investors now eye the US Retail Sales for some impetus ahead of Fed Chair Powell’s speech.

Gold once again showed some resilience below the $1,800 mark and staged a goodish intraday bounce from its lowest level since late January touched earlier on Monday. The US dollar added to Friday's modest losses and retreated further from a two-decade high amid some follow-through profit-taking. The intraday USD selling bias remained unabated following the disappointing release of the Empire State Manufacturing Index, which plunged to -11.6 in May and indicated worsening conditions. A weaker greenback was seen as a key factor that prompted intraday short-covering around the dollar-denominated commodity.

Adding to this, concerns that a more aggressive move by major central banks to curb inflation could hit the global economic growth offered additional support to the safe-haven XAUUSD. Investors also seem worried that China's zero-covid policy and the war in Ukraine would continue to push consumer prices higher. This further benefitted gold's status as a hedge against inflation, though expectations that the  Fed would need to take more drastic action to bring inflation under control capped any meaningful upside. In fact, the markets are pricing in at least a 50 bps Fed rate hike move over the next two meetings.

Hence, the focus now shifts to Fed Chair Jerome Powell's speech later this Tuesday, which will be looked upon for clues about the possibility of a jumbo 75 bps rate hike in June. Heading into the key event risk, the US monthly Retail Sales figures would influence the USD price dynamics and produce some meaningful trading opportunities around gold. In the meantime, a pickup in the US Treasury bond yields and modest recovery in the equity markets kept a lid on the non-yielding yellow metal. Hence, it will be prudent to wait for strong follow-through buying before confirming that the XAUUSD has formed a near-term bottom.

Technical outlook

From a technical perspective, the attempted recovery move stalled just ahead of the $1,830 level. This is closely followed by the very important 200-day SMA, around the $1,836 region, which should act as a pivotal point for short-term traders. Sustained strength beyond might trigger a fresh bout of a short-covering move and lift spot prices back towards the $1,859-$1,860 supply zone. That said, oscillators on the daily chart are still holding deep in the bearish territory and warrant some caution before positioning for a meaningful recovery.

On the flip side, the $1,811-$1,808 region now seems to protect the immediate downside ahead of the $1,800 round-figure mark and the overnight swing low, around the $1,786 area. A convincing breakthrough the said support levels would make gold vulnerable to weaken further below the 2022 low, around the $1,780 level. The downward trajectory could get extended towards testing the next relevant support near the $1,760 zone and the $1,753-$1,752 region.