Market news
12.05.2022, 21:48

Gold Price Forecast: XAU/USD sees a drop to near $1,800 as odds of a Fed’s bumper rate hike bolsters

  • Gold price is declining towards $1,800.00 as DXY has strengthened on upbeat economic data.
  • The precious metal has struggled at best to overstep the 200-EMA.
  • The DXY has renewed its 19-year high at 104.93 on a higher US PPI.

Gold Price (XAU/USD) is continuously dropping south as raising odds of a bumper rate hike by the Federal Reserve (Fed) in its June monetary policy are punishing the precious metal. The bright metal extended its losses on Thursday after establishing below the two-day low at $1,832.07. The selling momentum is expected to drag the gold prices to near the psychological support of $1,800.00.

The US administration is outperforming on the economic data front. The upbeat US Nonfarm (NFP) Payrolls, higher-than-expected US Consumer Price Index (CPI), and strong Producer Price Index (PPI) numbers are advocating for the continuation of an aggressive hawkish stance by the Fed. The tight labor market and galloping inflationary pressures have left no other option for the Fed than to step up the interest rates.

On the US dollar front, the US dollar index (DXY) has renewed its 19-year high at 104.93 after the US Bureau of Labor Statistics reported the yearly US PPI at 11%, higher than the forecasts of 10.7%. While the core PPI that excludes food and energy prices is landed at 8.8%, a little lower than the consensus of 8.9%.

Gold technical analysis

On the daily scale, gold prices struggled to regain their mojo by overstepping the 200-period Exponential Moving Average (EMA) at $1,858.04. Failing to do so, bears drag the precious metal sharply lower. The 20-EMA at $1,883.18 will continue to act as a major resistance for the counter. Meanwhile, the Relative Strength Index (RSI) (14) has shifted into a bearish range of 20.00-40.00, which adds to the downside filters.

Gold daily chart


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