Gold Price Forecast: XAU/USD declines towards $1,650 as hawkish Fed bets soar

• Gold prices are facing selling pressure on expectations of a bigger-than-expected Fed rate hike.
• The precious metal is expected to re-test the two-year low at $1,654.50.
• A downside break of the Ascending Triangle indicates more weakness ahead.

Gold price (XAU/USD) has turned sideways in a narrow range of $1,660.00-1,667.00 after declining from the critical hurdle of $1,680.00 on Tuesday. The precious metal is expected to display more weakness ahead of the interest rate decision by the Federal Reserve (Fed) and will likely kiss the two-year low at around $1,654.50.

The yellow metal is facing severe heat from the market participants as the Fed is expected to scale up the current pace of hiking interest rates. Fed’s foremost priority is to bring price stability into the economy and a recent reading of the inflationary pressures doesn’t display a meaningful response from the latter. The Fed could not let high inflation settle into the economic behavior as it may destroy the confidence of consumers in the economy.

Meanwhile, the US dollar index (DXY) has established above the psychological hurdle of 110.00 and is expected to remain in positive territory. More upside seems imminent as the Fed is highly expected to tighten the policy with a much bigger rate. Also, the guidance will be extremely hawkish ahead.

Gold technical analysis

Gold prices have delivered a downside break of the Ascending Triangle whose upward-sloping trendline is placed from the previous week’s low at $1,654.17 while the horizontal resistance is plotted from Friday’s high at $1,680.39.

The 20-period Exponential Moving Average (EMA) at $1,667.30 is acting as major resistance for the bulls. Also, the Relative Strength Index (RSI) (14) has shifted into the bearish range of 20.00-40.00, which indicates more weakness ahead.

Gold hourly chart