Gold Price Forecast: XAU/USD consolidates in a range, remains vulnerable below 100-day SMA

• Gold price oscillates in a narrow trading band below the 100-day SMA through the Asian session.
• A softer risk tone and subdued US Dollar price action is seen lending some support to the metal.
• Hawkish outlook by major central banks holds back bullish traders from placing aggressive bets.

Gold price struggles to capitalize on the overnight bounce from the $1,919 region, or its lowest level since March 17 and oscillates in a narrow trading band through the Asian session on Thursday. The XAU/USD currently trades around the $1,933 area, nearly unchanged for the day, and seems vulnerable to slide further.

Economic woes and a softer US Dollar lend support to Gold price

Worries about a global economic downturn continue to weigh on investors' sentiment, which is evident from a generally weaker tone around the equity markets. Apart from this, subdued US Dollar (USD) demand is seen as another factor lending some support to the safe-haven Gold price. In fact, the USD Index (DXY), which tracks the Greenback against a basket of currencies, languishes near the monthly low in the wake of the uncertainty over the Federal Reserve's (Fed) rate hike path.

Hawkish major central banks act as a headwind for XAU/USD                                                                            

In fact, Fed Chair Jerome Powell, testifying before the House Financial Services Committee on Wednesday, noted that inflation remains very far from the Fed's target, though it may make sense to raise rates at a more moderate pace. Powell, however, added that the fight against inflation is still not over and despite a recent pause, officials agreed borrowing costs would likely need to move higher. This, in turn, reinforced expectations for at least a 25-basis point (bps) hike in July.

Adding to this, a more hawkish outlook by other major central banks keeps investors wary of the non-yielding Gold price. It is worth recalling that the Reserve Bank of Australia (RBA) and the Bank of Canada (BoC) delivered a surprise 25 bps hike earlier this month. Moreover, the European Central Bank (ECB) lifted rates to the highest level in 22 years, while the Bank of England (BoE) and the Swiss National Bank (SNB) are also expected to hike interest rates this Thursday.

Bias still seems tilted in favour of bearish traders

This, in turn, suggests that the path of least resistance for Gold price is to the downside and should hold back bullish traders from placing aggressive bets. Market participants now look to Powell's second day of testimony before the Senate Banking Committee.  Any signals on monetary policy will influence the USD and will likely affect Gold prices. Traders on Thursday will further take cues from the Weekly Initial Jobless Claims and Existing Home Sales data from the United States (US).

Gold price technical outlook

From a technical perspective, the back-to-back closer below the 100-day Simple Moving Average (SMA) could be seen as a fresh trigger for bearish traders and adds credence to the negative outlook. Moreover, oscillators on the daily chart are holding in the bearish territory and are still far from being in the oversold zone. This, in turn, suggests that the path of least resistance for the Gold price is to the downside. Some follow-through selling below the overnight swing low, around the $1,919 area, will reaffirm the bearish bias and drag the XAU/USD towards the $1,900 mark. The downward trajectory could get extended further towards the $1,876-$1,875 horizontal support before the XAU/USD eventually drops to the very important 200-day SMA, currently around the $1,840 region.

On the flip side, the 100-day SMA, currently pegged around the $1,942 zone, now seems to act as an immediate strong barrier. Any subsequent move beyond might continue to attract fresh supply and remain capped near the $1,962-$1,964 region. The next relevant hurdle is seen near the $1,970-$1,972 zone ahead of the $1,983-$1,985 region. A sustained strength beyond the said barriers might trigger a fresh bout of a short-covering move, allowing the Gold price to surpass the $2,000 psychological mark and climb further towards the $2,010-$2,012 resistance.

Key levels to watch