Gold Price Forecast: XAU/USD approaches $1,620 support as risk-aversion, Fed bets propel yields

• Gold price holds lower ground near monthly low after falling the most in 12 days.
• Higher inflation renewed recession woes, China-linked headlines adds strength to the risk-off mood.
• DXY rebounds as US 10-year Treasury yields refresh 14-year high.
• Risk-off mood, firmer US dollar can keep XAU/USD bears hopes of witnessing fresh 2022 low.

Gold price (XAU/USD) refreshes the monthly low near $1,626 during Thursday’s mid-Asian session. That said, the yellow metal snapped two-day recovery the previous day while falling the most in a fortnight as sour sentiment joined firmer Treasury yields to underpin the US dollar’s rebound.

The US Dollar Index (DXY) regains 113.00 threshold after bouncing off a two-week low the previous day. In addition to the risk sentiment, the hawkish Fed bets also favored the greenback’s gauge versus the six major currencies, which in turn weighed on the bullion prices.

As per the CME’s FedWatch Tool, markets price in around 95% chance of the Fed’s 75 bps rate hike in November. The hawkish Fed wagers seem to justify the upbeat comments from the Federal Reserve (Fed) policymakers and raise fears of economic slowdown.

Recently, Chicago Fed President Charles Evans said that (they) need to make sure inflation pressures don't broaden further, which in turn suggests more rate hikes despite the recession woes. It should be noted that the Fed’s Beige Book added to the market’s fears by showing increased pessimism among the respondents.

The same joins the broadly firmer inflation numbers from Britain, Eurozone and Canada to inflation the economic woes and weigh on the XAU/USD prices. On the same line were headlines concerning China. The dragon nation registered four-month high covid numbers while the US readiness to tie up with Taiwan to co-produce American weapons, per Nikkei, adds to the Sino-American tussles. Given China’s status as one of the world’s gold consumers, negative from Beijing drown the metal prices.

The US 10-year Treasury yields refreshed a 14-year high above 4.0% as market players rushed towards the risk-safety. The same weighed on the Wall Street and S&P 500 Futures afterward.

Moving on, gold prices are likely to witness further downside amid a light calendar in the US and anticipated inaction from the People’s Bank of China (PBOC) during its monetary policy meeting.

Technical analysis

A fortnight-old resistance line joins bearish MACD signals and downbeat RSI to direct gold price towards a horizontal support zone comprising lows marked during late September, around $1,620.

It should, however, be noted that the same could test the XAU/USD bears amid a nearly oversold RSI (14), a break of which will direct the fall towards the yearly low of $1,614, highlighting the $1,600 threshold.

Alternatively, the aforementioned resistance line, around $1,643, guards the quote’s immediate recovery moves ahead of the 21-DMA hurdle surrounding $1,665.

Even so, the gold buyers remain cautious unless the bullion provides a daily closing beyond the 50-DMA, around $1,700 by the press time.

Overall, the bears are likely to keep the reins but the downside room appears limited.

Gold: Daily chart

Trend: Limited downside expected