Market news
17.05.2022, 15:28

Gold Price Forecast: XAU/USD bulls suffer around the 200-DMA and throw the towel as gold slips to $1820s

  • After snapping two days of consecutive losses on Monday, the yellow metal remains on the backfoot and is down 0.13% on Tuesday.
  • The market mood remains positive, weighing on safe-haven peers and precious metals.
  • Gold Price Forecast (XAU/USD): Remains defensive and failure to register a daily close above $1820-25, a re-test of the YTD lows around $1780s, is on the cards.

Gold spot (XAU/USD) modestly slides after facing a solid resistance near the trend-setter 200-day moving average (DMA) at around $1837.57, which held nicely and pushed XAU/USD price towards the two-year-old upslope trendline around $1820-25 area, amidst a positive market mood and high US Treasury yields. At the time of writing, XAU/USD is trading at $1820.76 in the North American session.

The Covid-19 situation in Shanghai improves, lifts the market mood

Sentiment has improved, as Shanghai reported no Covid-19 cases for the third consecutive day and would begin easing restrictions gradually. Portraying the aforementioned are global equities trading in the green, despite Fed Chair Jerome Powell hitting the wires at around 18:00 GMT. Regarding geopolitics linked to the Ukraine-Russia war, hostilities remain while the Russian Foreign Ministry Lavrov added that there are no talks with Ukraine.

In the meantime, the US Dollar Index, a measurement of the greenback’s value vs. a basket of rivals, remains soft in the day and drops to a two-week low, at 103.481, down some 0.68%, despite higher US Treasury yields, led by the 10-year benchmark note at 2.949%, gaining six basis points, a headwind for the yellow metal.

Before Wall Street opened, the US economic docket featured Retail Sales for April, which showed the resilience of consumers. The figures came at 0.9% m/m, in line with expectations. While the annual based number came at 8.2% y/y, smashing the 4.2% estimations. Also, Industrial Production posted good numbers, beating monthly and yearly forecasts, further cementing the case of the Federal Reserve tightening monetary policy at the pace that began a couple of weeks ago.

Additionally to macroeconomic data, Fed speakers would continue in the day. Earlier, St. Louis Fed President James Bullard said that the continued strong growth trend for the US economy is the base case outlook for the next 18 months at least, and added that household consumption is expected to hold up well through this year. He emphasized that the base case scenario for the Fed is 50-bps rate hikes at upcoming Fed meetings.

Also read:

  • Fed’s Bullard: 50 bps rate increases at the coming meetings are a good base case for now
  • Fed’s Bullard: Most pressing issue for Fed is inflation, labour market remains “super tight”

Gold Price Forecast (XAU/USD): Technical outlook

The price of gold remains downward pressured once XAU/USD broke below the 200-day moving average (DMA). Despite an earlier attempt to overcome the previously-mentioned DMA. Albeit XAU/USD remains defensive, it is trading around familiar ranges. However, faltering to record a daily close above the two-year-old upslope trendline around $1820-25 would open the door for further losses.

If gold bulls fail at $1820-25, XAU/USD’s first support would be $1800. Break below would expose the May 16 daily low at $1786.50, followed by the YTD low at $1780.18, and then December 15, 2021, daily low at $1752.35.

 

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