Gold Price Forecast: XAU/USD bears finally in town as Fed Chair Powell’s Testimony looms

• Gold Price stays pressured after breaking 100-DMA support during three-day downtrend.
• Risk aversion underpins US Dollar strength and weighs on XAU/USD price.
• Fears of economic slowdown originating from China, higher rates in the West roil sentiment and favor Gold sellers.
• Federal Reserve Chairman Jerome Powell’s bi-annual Testimony will be crucial to watch for clear directions of XAU/USD.

Gold Price (XAU/USD) holds lower ground at the weekly bottom, licking its wounds after a three-day downtrend near $1,937, as market players prepare for this week’s key event, namely the bi-annual Testimony of Fed Chair Jerome Powell. It’s worth noting that the risk-negative headlines surrounding China, hawkish Federal Reserve (Fed) news and upbeat United States (US) data allow the XAU/USD bears to remain hopeful.

Gold Price struggles to justify downbeat China, Fed catalysts

Gold Price stays defensive at around $1,937 by the press time, probing a three-day downtrend near the weekly low, as it struggles to justify the risk-negative headlines surrounding Cina and the Federal Reserve (Fed).

Recently, the news that US President Joe Biden on Tuesday called Chinese President Xi Jinping a dictator prod the XAU/USD pair’s recovery moves near the intraday high. The comments flag grim concerns surrounding the US-China ties after US Secretary of State Antony Blinken’s visit to Beijing failed to provide any major positives. The same should keep the Gold pair sellers hopeful.

Previously, sentiment soured after the People's Bank of China (PBoC) cut two key lending rates (Loan Prime Rate (LPR) and Medium-term Landing Facility (MLF) rate for the first time in almost a year.

Additionally, hawkish comments from the Fed Officials and upbeat US data also weigh on the Gold Price. On Tuesday, Fed governor and Vice Chair Nominee Philip Jefferson said, “I remain focused on returning it to our 2% target.” On the same line, Federal Reserve Governor Lisa Cook said "I am committed to promoting sustained economic growth in a context of low and stable inflation," in her statement to be given before the Senate on Wednesday. Further, Fed Board nominee Adriana Kugler also mentioned, per the prepared statements for Wednesday’s Testimony, that returning inflation to the central bank's 2% target is key to setting a strong foundation for the US economy.

Apart from the hawkish Federal Reserve (Fed) comments, upbeat United States (US) data also favored the Gold sellers. That said, US Housing Starts jumped to the highest level since April 2022 by rising 21.7% MoM in May versus -2.9% (revised from +2.2%) recorded in April and -0.8% market forecasts. On the same line, Building Permits were also upbeat for the said month, up 5.2% MoM versus -5.0% expected and -1.4% previous readings (revised from -1.5%).

Against this backdrop, the Wall Street benchmark began the week on the negative side while the US Treasury bond yields also snapped a two-day winning streak.

Looking ahead, a light calendar ahead of Fed Chair Jerome Powell’s bi-annual Testimony can keep the Gold traders on a dicey floor.

Gold Price technical analysis

A daily closing below the 100-DMA flags the Gold Price downside as traders await this week’s key event, namely Federal Reserve Chairman Jerome Powell’s bi-annual Testimony.

It’s worth noting, however, that the Relative Strength Index (RSI) line is below 50.0 and the Moving Average Convergence and Divergence (MACD) indicator also flashes sluggish signals, which in turn suggests that the Gold Price has limited room toward the south.

This highlights a convergence of the 38.2% Fibonacci retracement level of the XAU/USD’s run-up from November 2022 to May 2023 and an ascending support line from late 2022, near $1,903, quickly followed by the $1,900 round figure.

In a case where the Gold price fails to rebound from the $1,900 threshold, the odds of witnessing a slump towards the 50% and 61.8% Fibonacci retracements, respectively near $1,948 and $1,793 can’t be ruled out.

Meanwhile, Gold Price recovery remains elusive unless the bulls manage to cross the 50-DMA hurdle of around $1,983.

That said, the 100-DMA and 23.6% Fibonacci retracement level, close to $1,942 and $1,972 in that order, guard short-term rebound of the XAU/USD price.

To sum up, the Gold Price lures bears with the 100-DMA breakdown but the road towards the south appears long and bumpy.

Gold Price: Daily chart

Trend: Further downside expected