Gold Price Forecast: XAU/USD sees pullback before targeting $1,804 support

• Gold price is in the green for the first time this week as bears take a breather. 
• Federal Reserve Minutes fuelled a US Dollar rally, US Treasury yields struggled.
• Focus shifts to United States data and Fed officials for fresh trading impetus.
• Gold price yields a downside break below $1,825, the next target seen at $1,804.

Gold price is coming up for some air on Thursday after witnessing three straight days of dismal performances. Gold price witnessed a good up and down session on Wednesday, courtesy of the brewing geopolitical tensions and the hawkish US Federal Reserve (Fed) Minutes of the February meeting.

Federal Reserve Minutes read as hawkish

Gold price extended its recovery mode in the first half of Wednesday’s trading and advanced toward $1,850 once again but sellers jumped into the game just ahead of the Fed Minutes release, smashing rates below the critical support at $1,825.

Gold bears renewed daily lows on the first FOMC Minutes after they showed that some of the policymakers debated a 50 basis points (bps) rate hike in the February meeting. Additionally, they agreed over the need for more rate increases and acknowledged that the tight labor market in the United States would continue to put upward pressure on inflation.

The Federal Reserve Minutes only bolstered the heightened expectations surrounding three more rate hikes this year, triggering a fresh US Dollar rally. The US Treasury bond yields also snapped its downward momentum and recovered slightly, exerting further bearish pressures on Gold price. Market pricing now implies expectations for a peak of nearly 5.4% in July. A month ago, investors had priced in a peak of 4.9% in June. 

Geopolitical woes boost the United States Dollar

The safe-haven US Dollar also found additional legs on its way higher, courtesy of the looming geopolitical tensions surrounding the United States and China over Russia. US Secretary of State Antony Blinken warned that China is seriously exploring supplying arms to Russia.

In defense, a Chinese Foreign Ministry spokesman, Wang Wenbin, said on Wednesday, “it is a known fact that NATO countries including the US are the biggest source of weaponry for the battlefield in Ukraine, yet they keep claiming that China may be supplying weapons to Russia.”

Meanwhile, US officials announced late Wednesday that the Biden administration is considering releasing intelligence it believes shows that China is weighing whether to supply weapons to support Russia’s war in Ukraine.

United States data coming up next

The focus now shifts toward a fresh batch of United States economic data releases, including the Gross Domestic Product revision, weekly Jobless Claims and the Core Personal Consumption Expenditures, for fresh hints on the state of the economy, which could further help strengthen the Federal Reserve’s hawkishness.

Also, traders will closely scrutinize comments from Atlanta and San Francisco Fed chiefs, Raphael Bostic and Mary Daly, especially after New York Fed John Williams noted that it’s critical the Federal Reserve remains committed to its 2% inflation goal and emphasized monetary policy must bring supply and demand into better balance to lower inflation.

Gold price, therefore, remains at the mercy of the Fed expectations and the broader market sentiment, with risks skewed to the downside, as backed by the daily technical setup. 

Gold price technical analysis: Daily chart

Gold price has finally yielded a downside break, on a daily closing basis, from the critical horizontal trendline support from the January 5 low at $1,825.

The breakdown has re-opened floors toward the $1,800 threshold. However, Gold bears will need to take out the seven-week low of $1,819 and the falling trendine support at $1,804 beforehand.

A slight uptick in the 14-day Relative Strength Index (RSI) is offering support to Gold buyers, for now. But the indicator continues to stay below the midline, keeping any upside attempts short-lived.

On the flip side, the $1,850 psychological level need be scaled on a sustained basis to revive the bullish interests. The intraday high at $1,831 and the last Friday’s high at $1,848 could make it a tough road for Gold buyers on a potential recovery attempt.