Gold Price Forecast: XAU/USD stays depressed below $1,650 inside bearish channel, focus on yields

• Gold price remains mildly offered while bracing for the second weekly loss.
• Fears of higher inflation, central bank’s aggression propels yields, DXY.
• Last round of Fedspeak before pre-FOMC silence will be crucial for XAU/USD bears amid hawkish bets.

Gold price (XAU/USD) remains on the back foot around $1,625, grinds lower of late, as the metal traders seek fresh clues during Friday’s sluggish session. Even so, fears of recession and firmer yields keep the bears hopeful around the yearly low.

The market’s pessimism could be learned from the multi-year high US Treasury bond yields as the benchmark 10-year coupons refreshed 14-year high the previous day, around 4.22% by the press time. Also, the two-year US Treasury yields rose to the highest levels since 2007 before recently taking rounds to 4.62%.

Underlying the fears of a recession are the mostly firmer US data and hawkish Fedspeak. On Thursday, US Initial Jobless Claims eased to 214K for the week ended on October 07 versus 230K expected and a revised down 226K prior. Further, Philadelphia Fed Manufacturing Survey Index dropped to -8.7 for October versus the -5 market consensus and -9.9 previous reading. Additionally, US Existing Home Sales rose past 4.7M expected to 4.71M but eased below 4.78M prior.

Recently, Federal Reserve Governor Lisa Cook mentioned that ongoing rate increases will be required.

Amid these plays, Wall Street closed in the red following an initially upbeat performance while the S&P 500 Futures extend the previous day’s losses with 0.50% intraday downside at the latest. Further, the CME’s FedWatch Tool suggests a near 98% chance of the Fed’s 75 bps rate hike.

To sum up, gold’s latest weakness is likely to extend but a lack of major data/events could restrict the heavy downside. Even so, today’s Fedspeak will be important as it precedes the pre-Fed blackout period.

Technical analysis

Gold price holds lower ground inside a fortnight-long bearish channel, retreating from the top of late.

Given the bearish MACD signals and the downbeat RSI, not oversold, the XAU/USD prices may extend the latest pullback from the stated channel’s upper line towards the yearly low near $1,615.

However, the bearish formation’s bottom surrounding $1,595 could challenge gold bears afterward.

Meanwhile, an upward clearance of the $1,635 hurdle, comprising the channel’s upper line, will defy the bearish chart pattern and could propel the quote toward the 21-DMA hurdle surrounding $1,663. Even so, the gold buyers remain unconvinced below the 50-DMA level of $1,696.

Gold: Daily chart

Trend: Further downside expected