Gold Price Forecast: XAU/USD eyes $1,645 as Fed’s 75 bps rate hike appears priced in

• Gold price extends pullback from 21-EMA inside a six-week-old bearish channel.
• Firmer yields, hawkish Fed bets keep XAU/USD bears hopeful.
• Fears emanating from China, Ukraine also favor the metal sellers.
• Recently firmer odds of Fed’s 1.0% rate hike appear interesting for gold sellers as 75 bps lift is priced-in.

Gold price (XAU/USD) remains sidelined as bulls and bears struggle ahead of the key Federal Reserve (Fed) monetary policy announcements. That said, the bullion prices remain pressured around the yearly low, down for the second consecutive day, as traders flirt with the $1,660 heading into Wednesday’s European session.

With Nouriel Roubini’s call for a “long and ugly” inflation drive, as well as the support for the 1.0% Fed rate hike, the market’s hawkish bets for the larger-than-expected rate increase jumped to 18%. The same allowed the US Treasury yield and the US dollar to remain firmer, before portraying the inaction ahead of the key Federal Open Market Committee (FOMC) meeting results.

That said, the US Dollar Index (DXY) renews a two-week top around 110.30 while the benchmark Treasury bond yields retreat from the multi-day high. It’s worth noting that the US 2-year Treasury yields jumped to the highest level in 15 years while the 10-year counterpart also rose to the 11-year top on Tuesday.

Other than the Fed-linked chatters, economic fears from China and Russia also weigh on the XAU/USD prices. A fresh covid-led lockdown in China’s steel hub of Tangshan joins the sour economic forecast from the Asian Development Bank (ADB), as well as the Sino-American tussles over Taiwan and phase one deal, which seems to portray hardships for the dragon nation.

Elsewhere, Russia’s plans for occupied regions and the Western agitations for the same also weigh on the XAU/USD prices. “Moscow-installed leaders in occupied areas of four Ukrainian regions plan to hold referendums on joining Russia in coming days, a challenge to the West that could sharply escalate the war and which drew condemnation from Ukraine and its allies,” said Reuters. On the same line are the headlines suggesting US Senators’ demand for secondary sanctions on Russian oil also appears to challenge the market’s risk appetite.

Amid these plays, the S&P 500 Futures remain pressured near the two-month low marked the previous day while stocks in the Asia-Pacific see the red.

Moving on, XAU/USD moves will depend upon how well the Fed manages to please traders as it will unveil the measures to tame inflation and ensure less economic damage at the same line.

Technical analysis

Gold price portrays the market’s bearish bias inside a downward-sloping trend channel since early August. Also keeping the XAU/USD sellers hopeful is the metal’s latest U-turn from the 21-EMA amid impending bear cross on the MACD.

It should, however, be noted that the RSI could enter the oversold territory and might test the metal sellers during the quote’s further downside targeting the stated channel’s bottom, around $1,645.

Alternatively, an upside break of the 21-EMA surrounding $1,672 is an open invitation to the gold buyers as the bearish channel’s top and the 200-EMA could test the advances around $1,713 and $1,720 respectively.

Gold: Four-hour chart

Trend: Further weakness expected