Gold Price Forecast: XAU/USD remains depressed near multi-month low, just above $1,820 level
|- Gold continues losing ground for the seventh straight day and drops to a fresh multi-month trough.
- Hawkish Fed expectations, elevated US bond yields and bullish USD continue to weigh on the metal.
- A softer risk tone fails to lend support, though oversold conditions could help limit any further losses.
Gold price (XAU/USD) prolongs its recent well-established downtrend for the seventh successive day and drops to the $1,820 area, its lowest since March 9 during the Asian session on Tuesday.
The Federal Reserve’s (Fed) higher-for-longer interest rate narrative pushes the US Treasury bond yields to a fresh multi-decade high and continues to underpin the US Dollar (USD), which, in turn, is seen undermining the Gold price. Investors now seem convinced that the US central bank will stick to its hawkish stance and have been pricing in the possibility of at least one more rate hike by the end of this year.
The bets were reinforced by Cleveland Fed President Loretta Mester, saying that risks to inflation remain tilted towards the upside and the US central bank will need to keep rates restrictive to get it back to the 2% target. This ensures that the Fed will continue to tighten its monetary policy and turns out to be another factor that further contributes to driving flows away from the non-yielding Gold price.
The ongoing downward trajectory, meanwhile, seems rather unaffected by a generally weaker risk tone, which tends to benefit the precious metal's safe-haven status. The initial market reaction to the mixed Chinese PMIs and the passage of a US stopgap funding bill over the weekend turned out to be short-lived amid worries about a deeper economic downturn, albeit does little to lend any support to the Gold price.
That said, the Relative Strength Index (RSI) on the daily chart is flashing extremely oversold conditions, which might hold back bearish traders from placing fresh bearish bets around the XAU/USD. Nevertheless, the aforementioned fundamental backdrop suggests that the path of least resistance for the Gold price is to the downside and any meaningful recovery attempt might still be seen as a selling opportunity.
Technical levels to watch
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.