Gold Price Forecast: XAU/USD drops back towards 200-DMA as bears attack $1,850 on USD rebound

• Gold takes offers to renew daily low as DXY bounces off monthly low.
• US dollar tracks recovery in yields ahead of Biden-Powell meet.
• Market sentiment remains firmer amid easing bets on Fed’s aggressive rate hikes, China’s unlock.
• Gold Price Forecast: Where can it go from here?

Gold Price (XAU/USD) extends the week-start pullback from the monthly resistance line during Tuesday’s mid-Asian session. In doing so, the precious metal drops to $1,850, refreshing intraday low, by the press time.

The commodity’s latest weakness could be linked to the US dollar’s rebound from a one-month low as full markets return to the table. That said, the US Dollar Index (DXY) snaps a three-day downtrend around a five-week low, picking up bids to 101.56 at the latest, as bond yields pare recent losses.

The US 10-year Treasury yields begin the week’s trading with nearly six basis points (bps) of an upside by crossing the 2.8% hurdle. Even so, “Bonds in almost every corner of the $63 trillion global debt market are bouncing back as investors begin to see value once again in fixed-income asset,” said Bloomberg. The reason for the latest bond selling could be linked to the market’s consolidation during the month-end moves.

It should be noted that the market sentiment remains firmer as S&P 500 Futures rise 0.50% intraday at the latest, which in turn probes the US dollar rebound. However, traders need validation of the latest risk-on mood and hence the recent fall in gold prices seems illusionary.

Looking forward, headlines from the Eurogroup meeting, Chicago Purchasing Managers’ Index and Dallas Fed Manufacturing Business Index for May could direct gold traders.

Technical analysis

Gold prices extend pullback from the monthly resistance line, around $1,861 by the press time, as sellers aim to retest the 200-DMA support near $1,840.

Given the steady RSI and bullish MACD signals, the gold price may print another rebound from the stated key moving average, failing to do so could direct the XAU/USD towards the $1,800 threshold.

However, the yearly horizontal support zone near $1,787-85 appears a tough nut to crack for gold sellers afterward.

On the contrary, buyers need to cross the monthly resistance line near $1,861 on a daily closing basis to retake control.

Even so, 61.8% Fibonacci retracement (Fibo.) of December 2021 to March 2022 upside, near $1,875, could test the bulls.

Overall, gold prices are likely to witness further selling but the downside appears limited.

Gold: Daily chart

Trend: Further weakness expected