Gold Price Forecast: XAU/USD is pulling in the bid following big drop

• Gold bears take the lead but the bulls are making their move.
• The US dollar is taking the lead ahead of the Fed, causing a capitulation in the yellow metal.

Gold prices have settled down into the late session of the New York trade but it begs more from the bears at this juncture as the gold price rest at key support. On the day, the yellow metal dropped heavily from a high of $1698.32 to a low of $1,660.43. The bulls need to commit here, at the lowest since May 2020.

Pressures come as the greenback US  bond yields keep rising ahead of next week's Federal Reserve's policy committee meeting. Analysts at TD Securities explained that the precious metal has broken the'' $1700/oz support as aggressive Fed expectations are being priced in.''

''We expect continued outflows from money managers and ETF holdings to weigh on prices, which ultimately raises the probability of a pending capitulation from the small number of family offices and proprietary trading shops who hold complacent length in gold. The persistence of inflation continues to support an aggressive effort by the Fed.''

Traders are of the view that the Federal Reserve will keep tightening policy aggressively. The data of late, including this week's surprise increase in consumer prices in August, has reinforced the bullish case for the greenback as investors price in a third consecutive 75-basis-point rate hike next Wednesday.

The analysts at TD Securities note that ''indeed, gold and silver prices have tended to display a systematic underperformance when markets expect the real level of the Fed funds rate to rise above the neutral rate, as estimated by Laubach-Williams.''

Gold technical analysis

As per the prior analysis, the price of gold has indeed headed lower:

Gold H1 chart

The bears have well and truly made their move. 

And from here...

The daily M-formation is now compelling for a retracement into the prior lows that meets that 38.2% Fibonacci retracement area.