Gold Price Forecast: XAUUSD bears aim for $1,800 on Powell’s testimony

• Gold Price remains exposed to more downside risks, with Powell ahead.
• Powell could affirm Fed’s aggressive rate hike track for upcoming months.
• XAUUSD’s daily technical set up lean bearish, as USD cheers recession fears.

Gold Price is extending its losing streak into the fourth straight trading day on Wednesday, heading towards the $1,800 threshold after facing rejection at the critical 200-Daily Moving Average (DMA) at $1,843 a day before. The recovery in risk sentiment across the global markets weighed extensively on the US dollar safe-haven demand on Tuesday. Gold price, however, failed to capitalize on the ongoing dollar correction, as the US Treasury yields paused their downslide amid investors’ reassessment of the euphoria around a potential recession. The turnaround in Wall Street indices reflected the positive market mood and aided the dollar’s pullback, which capped the losses in the bright metal.

The narrative that aggressive Fed rate increases will tip the US economy into a recession remains in play heading towards much-awaited testimony by Fed Chair Jerome Powell on Wednesday. Powell is due to testify before Congress on the Fed’s semi-annual Monetary Policy Report on Wednesday and Thursday. XAU/USD is sitting close to the lowest level so far this week at $1,826, as the flare-up over recession fears has boosted the dollar’s safe-haven appeal. Although risk-aversion-led sell-off in the Treasury yields is offering temporary reprieve to gold bulls.

With Powell’s testimony and the Q&A session in focus, the central bank Chief’s affirmation of a likely 75 bps rate hike in July could provide legs to the renowned upside in the dollar while lifting the yields across the curve. In such a case, gold price could accelerate its decline towards the key $1,800 support. Markets are pricing in a 97% probability of a 75 bps Fed rate hike next month, according to the CME FedWatch tool. Meanwhile, the latest Reuters poll showed median forecasts for a 50 bps lift-off in September, suggesting that the Fed remains committed to fighting inflation head-on.

Gold Price Chart: Daily chart

Technically, the daily setup is outrightly leaning in favor of bears, with a test of the rising trendline support at $1,810 inevitable following rejection above the 200 DMA on multiple occasions.

Additionally, the bearish 21 DMA is set to cross the horizontal 200 DMA for the downside, which if happens will confirm a bear cross formation. The bearish crossover will add credence to the renewed downtrend in the yellow metal.

Sellers will then challenge the June lows of $1805 on their way to the key $1,800 round figure.

The 14-day Relative Strength Index (RSI) is pointing south below 50.00, justifying the bearish view on the metal.

Alternatively, gold price needs a sustained move above the 200 DMA barrier to reverse the ongoing downside momentum. The 21 DMA coincides at that level.

Acceptance above the latter could test the $1,850 psychological level. Daily closing above that level will threaten the intermittent tops at $1,858.