Gold Price Forecast: XAU/USD struggles to hold above $1800 amidst risk-aversion

• On Wednesday, the non-yielding metal is almost flat as investors assess the pace of the Fed’s tightening.
• A buoyant US dollar keeps gold on the defensive, though holding above $1800.
• TD Securities analysts report that Gold ETF holdings have fallen for a ninth consecutive day.
• Gold Price Forecast (XAU/USD): The bias is neutral-downward, and a break below $1800 could send XAU/USD towards $1700.

Gold spot (XAU/USD) is trading negative in the day, though it remains at familiar levels, trapped in the $1800-20 region amid the lack of a catalyst that can push the bright metal beyond its current boundaries. At the time of writing, XAU/USD is trading at $1813.69

Gold remains on the defensive, despite having a risk-off environment, which usually helps the yellow metal. However, US dollar strength overshadows XAU/USD’s prospects, as the greenback gains some 0.18% against a basket of currencies, portrayed by the US Dollar Index at 103.486. Also, on Tuesday, Federal Reserve Chair Jerome Powell said that “What we need to see is inflation coming down in a clear and convincing way, and we’re going to keep pushing until we see that. If that involves moving past broadly understood levels of ‘neutral,’ we won’t hesitate at all to do that.”

Meanwhile, some financial analysts believe that the Fed will struggle to achieve a soft economic landing, meaning that it could cause a recession if needed to bring inflation down. This environment could be positive for gold, but bulls have been unable to challenge the 200-DMA at around $1837, much less the $1890 level, which needs to be reclaimed if they aim to lift prices above $1900.

Analysts at TD Securities wrote in a note that “With downside momentum firming among the precious metals complex, and broad macro liquidations also weighing, we continue to see further downside potential for gold. ETF holdings have fallen for a ninth straight day while positioning analytics still argue for the potential of additional pain for gold bugs.”

Macroeconomic-wise, the US docket featured Building Permits and additional housing data, which came mixed. Building Permits rose to 1.819 million, higher than the 1.812 million foreseen, but Housing Starts increased by 1.724 million, lower than the 1.765 million estimated, beginning to show signs of the Federal Reserve tightening. Later in the day, Philadelphia’s Fed Patrick Harker will cross wires.

Gold Price Forecast (XAU/USD): Technical outlook

At the time of writing, XAU/USD is trading below the two-year-old upslope trendline, drawn from September 2018 swing lows, as depicted by the weekly chart. It’s also worth noting that the 50-week moving average (WMA) crossed under the 100-WMA, each located at $1831.76 and $1840.96, respectively, a signal of sellers’ strength entering the market.

With that said, XAU/USD’s first support would be $1800. A breach of the latter would put the YTD lows at $1780.18 in play, a level that needs to be broken by gold bears if they aim to push prices towards $1700. Once XAU/USD bears reclaim $1780.18, the last line of defense would be December 15, 2021, swing low at $1752.35, followed by $1700.

Key Technical Levels