Gold Price Forecast: XAU/USD could run into offers near $1,880 on road to recovery

Gold Price failed to preserve Friday’s uptick and slumped to the lowest level in four days at $1,852 amid the US dollar dominance. The market witnessed a risk-off theme, as investors’ confidence was sapped by intensifying global economic growth fears. Worries over the impact of the Chinese covid curbs on the world’s no. 2 economy aggravated after the country reported trade surplus at two-year lows. Meanwhile, the Fed’s outlook on monetary policy normalization combined with the Ukraine crisis-led surging inflation continued to add to the gravitational forces around the Gold Price, as the greenback’s safe-haven appeal remained underpinned.

Although the losses in the bright metal appeared capped just above $1,850, as the dollar pulled back alongside the Treasury yields from multi-year tops, as Fed speakers returned and delivered conflicting messages on the central bank’s policy action. Atlanta Fed President Raphael Bostic said that the Fed's most recent 50 bps rate hike was an "aggressive" move and that the Fed can stay at this pace. Meanwhile, Fed’s Kashkari voiced his concerns over rising energy prices and softer wage growth. The Fed’s Financial Stability Report (FSR) highlighted liquidity risks in the economy, as the Wall Street indices tumbled by nearly 3%.

Gold Price is recovering ground towards the $1,900 mark this Tuesday amid a bit of a bounce in risk sentiment and the renewed downside in the US dollar. The Treasury yields hold on to their corrective stance, aiding the rebound in Gold Price. Early Asia, sentiment took a hit, as investors took a lead from the sharp sell-off on Wall Street overnight. Bitcoin price giving up the $30,000 mark also intensified the risk-off action in the Asian trading, weighing heavily on the equities and yields, which kept the greenback on the defensive.

Looking ahead, it remains to be seen if the recovery in Gold Price has legs, as the dollar could regain its safe-haven status if risk-aversion returns on the disappointing German ZEW survey. A sharp dip in the ZEW gauge could likely hint at an incoming recession in the old continent. Meanwhile, a slew of speeches from the Fed policymakers and US President Joe Biden will be closely followed for fresh USD valuations, eventually impacting Gold Price. US Treasury Secretary is also due to testify on the FSR later this Tuesday.

Gold Price Chart: Four-hour chart

 

Gold Price has yielded an upside break from the falling trendline resistance at $1,861 on a four-hourly candlestick closing basis.

This suggests that the renewed upside in the metal could have legs, with the next bullish target seen at around $1,872.

A firm break above the latter will call for a test of the downward-pointing 21-Simple Moving Average (SMA) at $1,876.

The 50-SMA at $1,880 will be the level to beat for gold bulls should the recovery momentum continue.

The Relative Strength Index (RSI) has turned flat below the midline, suggesting that the rebound could be losing steam.

If sellers return, then the immediate downside target is seen at the previous day’s low of $1,852, below which the psychological $1,850 level.

A fresh downswing will be initiated on a sustained move below the latter, opening floors towards the critical $1,835 demand area.