Gold Price Forecast: Bears hope more weakness below $1,907 amid risk-on impulse, FOMC meet eyed

• Gold price seeks more pain below $1,907.00 ahead of the Fed’s policy announcement.
• The DXY and US Treasury yields are also trading lower on active risk-on impulse.
• A bearish crossover from 20 and 50-period EMAs adds to the downside fillers.

Gold (XAU/USD) is falling sharply as investors are dumping the asset on skyrocketing odds of an interest rate hike by the Federal Reserve (Fed). The precious metal is hovering around $1,917.00 on Wednesday. Gold prices have witnessed a fall of almost 7.4% from their recent highs at $2,070.54 last week.

The Fed will announce the interest rate decision on Wednesday and a rate hike is imminent amid the soaring inflation. But the fact is, investors are eyeing the scale of a rate hike to adjust their positions in respect to the precious metal. A 25 basis point (bps) rate hike by the Fed may not have a serious impact on the gold prices as the market participants are aware that only a rate hike is the remedy to curtain the galloping inflation now. However, half of the percent rate hike by the Fed may trigger further short build-ups for the yellow metal.  

Apart from the caution over an aggressive tightening policy after the Fed Open Market Committee (FOMO) meet, improvement in the demand of risk-perceived assets has also trimmed preference for the precious metal. Global equities are trading in the bullish territory despite intensifying fears of Covid-19 in China. Also, fewer headlines from the Russia-Ukraine war have weighed pressure on the gold prices.

Meanwhile, the US dollar index (DXY) has settled below 99.00 after tracing subdued US Treasury yields on Wednesday. The 10-year US Treasury yields are trading at 2.15%, 0.34% down from Tuesday’s close.

Gold Technical Analysis

On a four-hour scale, XAU/USD is trading below 50% Fibonacci retracement (placed from January 28 low at $1,780.75 to March 8 high at $2,070.54) at $1,925.30. The 20-period and 50-period Exponential Moving Averages (EMA) have given a bearish crossover at $1,965.20, which adds to the downside filters.

The Relative Strength Index (RSI) (14) has shifted its range from 40.00-60.00 to 20.00-40.00, which indicates an establishment of a bearish setup.

Gold four-hour chart