Gold Price Forecast: XAUUSD attempts recovery from $1,940, Fed’s Powell bolsters 50 bps rate hike hopes

• The odds of a 50 bps interest rate hike have elevated after Fed Powell’s comments at the IMF meeting.
• Higher inflation pressures in a very tight labor market are compelling for squeezing the liquidity.
• A double bottom formation has raised expectations of a reversal in the gold prices.

Gold (XAU/USD) has bounced back sharply after hitting its potential support, which is placed near $1,940. The precious metal is shrugging off the fears of aggressive rate hike elevation after Federal Reserve (Fed)’s Jerome Powell bolstered the odds of 50 basis points (bps) interest rate hike by the Fed in May.

Fed’s Powell in his appearance at the International Monetary Fund (IMF) meeting along with European Central Bank (ECB) President Christine Lagarde, Bank of England (BOE) Governor Andrew Bailey, and other central bank leaders cited that a 50 bps rate hike is on the table this May. He further added that the Fed is likely to tighten the policy at a higher pace this time than in the previous hike cycles. Higher inflation pressures in a very tight labor market are compelling for squeezing the liquidity from the economy sooner rather than later.  

Meanwhile, the US dollar index (DXY) has witnessed a serious attempt to rebound as a sheer upside has been recorded in the DXT after it slipped below the psychological support of 100.00. For a long time, Fed policymakers have been dictating that investors should brace a tight policy environment for a few quarters as it is highly required to tame the soaring inflation. Also, the 10-year US Treasury yields have climbed above 2.90% on hawkish guidance by the Fed and are aiming to hit 3% for the very first time in the last three years.

Gold Technical Analysis

On an hourly scale, XAU/USD has formed a double bottom chart pattern, which signifies a bullish reversal amid the absence of high-volume sellers while re-testing the critical bottom. The gold prices have witnessed a sheer upside after the successful retest of Wednesday’s low at $1,939.31. The Relative Strength Index (RSI) (14) has defended itself from slipping into the bearish range of 20.00-40.00. Also, the precious metal has established above 20-period Exponential Moving Average (EMA), which signals more gains ahead.

Gold hourly chart