Gold Price Forecast: XAU/USD eyes monthly support near $1,650 ahead of Fed Minutes

• Gold price fades the previous day’s bounce off one-week low.
• Firmer DXY, cautious mood exert downside pressure on XAU/USD.
• Bears will seek confirmation of hawkish Fed bets from today’s FOMC Minutes to keep the reins.

Gold price (XAU/USD) renew downside momentum around $1,660, following a brief rebound from the weekly bottom, as the US dollar bulls return to the table during Wednesday’s Asian session. Also weighing on the metal prices could be the firmer yields and cautious mood ahead of today’s Federal Open Market Committee (FOMC) Meeting Minutes.

It should be noted that the latest comments from Cleveland Fed President Loretta Mester offered an immediate catalyst to the gold sellers as the policymaker mentioned that the Federal Reserve needs to hike rates further because inflation has not slowed during her speech.

Hawkish Fed bets and firmer US inflation expectations are also favoring the US dollar’s safe-haven demand, which in turn weighs on the XAU/USD price. That said, the CME’s FedWatch Tool signals a nearly 78% chance of the Fed’s 75 basis points (bps) of a rate hike in November. Furthermore, US inflation expectations, as per the 10-year breakeven inflation rates per the St. Louis Federal Reserve (FRED) data, rose to the highest levels since September 28 while flashing a 2.31% level at the latest.

Elsewhere, the International Monetary Fund’s (IMF) latest projections also help the DXY to remain firmer due to its traditional haven status, which in turn weighs on the gold price. On Tuesday, the IMF lowered the global economic growth forecast for 2023 to 2.7% from 2.9% estimated in July while citing pressures from high energy and food cost, rate hikes as the key catalysts for the move. It’s worth noting that the Washington-based institute left the 2022 growth forecast unchanged at 3.2% versus 6.0% global growth in the 2021"

That said, the US 2-year Treasury yields reverse the previous day’s pullback from a two-week top while picking up bids near 4.31% by the press time.

Looking forward, the market’s anxiety could keep the XAU/USD bears in command but the FOMC Minutes need to confirm the hawkish bias else there will be higher repercussions.

Technical analysis

Failure to provide a daily closing beyond the 21-DMA hurdle, surrounding $1,674, during the previous day’s corrective bounce off the fortnight low appears to keep the XAU/USD bears hopeful. However, the one-month-old horizontal support area near $1,651-54 challenges the gold sellers.

It should be noted that the clear downside break of the $1,650 support could quickly drag the metal toward the yearly low near $1,615 and then to the $1,600 threshold.

Alternatively, a daily close beyond the 21-DMA hurdle near $1,674 needs validation from the 50-DMA and a four-month-old resistance line, respectively near $1, 716 and $1,732, could challenge the XAU/USD bulls before giving them control.

Overall, sustained trading below the key moving averages and resistance lines joins the downbeat oscillators to favor gold sellers.

Gold: Daily chart

Trend: Further weakness expected