Gold Price Forecast: XAU/USD approaches $1,850 despite recession, Fed woes, Powell eyed

• Gold remains sidelined despite the bounce off intraday low, flashed biggest weekly fall in a month at the latest.
• Fears of economic slowdown, higher Fed rates underpin US dollar’s safe-haven demand.
• Fed Chair Powell’s testimony will be crucial after recent inflation fears triggered 75 bp rate hike.
• Headlines surrounding China appear to challenge intraday bears amid a quiet session.

Gold Price (XAU/USD) picks up bids to consolidate recent losses at around $1,840 during Monday’s Asian session, following the heaviest weekly fall since early May. While headings surrounding China appear to favor the corrective pullback, fears of global recession and higher Fed rates keep the metal buyers cautious amid a quiet session.

That said, a piece of news from Reuters saying, “President Joe Biden's administration is reviewing the removal of some tariffs on China,” joins upbeat covid news from Beijing and Shanghai to favor the market’s cautious optimism, which in turn favors the gold buyers.

On the other hand, the Washington Post (WaPo) raised fears of a tough new economic climate due to the US Federal Reserve (Fed) rate hike of the 75 basis points (bps). The news mentioned that the Fed’s rate hike launched a high-stakes test of the economy's ability to shed its dependence on limitless credit and tolerate higher borrowing costs for consumers, businesses and the government.

Also supporting the fears of recession, as well as hawkish Fed bets, were the key US central bank policymakers namely Minneapolis Fed President Niel Kashkari who backed another 75 bps rate hike in July. Furthermore, Treasury Secretary Janet Yellen also mentioned her expectations of a slowdown in the economy but ruled out recession concerns.

Amid these plays, Wall Street benchmarks closed mixed and the US Treasury yields remained pressured. However, the S&P 500 Futures print mild gains by the press time.

Moving on, gold traders should pay attention to Fed Chairman Jerome Powell’s Testimony for fresh impulse as the Fed Boss is likely to be questioned on inflation woes to justify the recent rate hike.

Also read: Gold Price holds above key level, focus shifts to Powell's testimony

Technical analysis

Gold remains inside a one-week-old bullish trend channel formation, despite repeatedly failing to cross the confluence of the 100 and 200 SMAs. That said, steady RSI and an impending bear cross of the MACD hint at the metal’s further downside.

However, a clear break of the $1,830 becomes necessary for XAU/USD sellers to retest the monthly horizontal support surrounding $1,805. Following that, the previous month’s low of $1,786 will be crucial for the metal sellers to watch.

Alternatively, the aforementioned SMA confluence around $1,846-48 challenges the immediate XAU/USD upside before the rising channel’s resistance line, at $1,867 by the press time.

In a case where gold prices rally beyond $1,867, the odds of witnessing a run-up towards the one-month-old resistance line near $1,880 can’t be ruled out.

Gold: Four-hour chart

Trend: Bearish