Gold Price Forecast: XAU/USD prints mild losses around $1,930 even as yields flag recession risk

• Gold rebounds from intraday low but stays depressed amid strong US dollar.
• US 10-year Treasury yields renew three-year high as Fedspeak suggests aggression towards faster rate-hikes.
• Ukraine-Russia tussles, China’s covid woes add to the risk-off mood.
• Might we see a minimal job loss recession? Why not?

Gold prices remain tight-lipped around $1,932, down 0.18% intraday, as it struggles to justify traditional safe-haven status amid firmer US dollar during Tuesday’s Asian session. The yellow metal offered an upbeat start to the week but buyers failed to keep the reins as the US Treasury yields rallied to a fresh multi-month high amid hopes of faster rate hikes by the US Federal Reserve (Fed), as well as looming economic recession.

US 10-year Treasury yields rise to a fresh high since May 2019 while taking the bids near 2.328% level by the press time as market’s fears of inflation magnify, pushing the Fed policymakers towards aggression in tightening monetary policies going forward.

On Monday, Atlanta Fed President Bostic and Richmond Fed’s Barkin promoted the US central bank’s ability to restrain inflation by indirectly signaling a faster pace of the rate hike. However, the comments from Fed Chair Jerome Powell who said, “The Fed will raise rates by more than 25bps at a meeting or meetings if necessary,” offered a major upside momentum to the T-bond coupons.

“Sharp moves in the US Treasury market are increasingly pointing to the risk of an approaching recession, with "bond vigilantes coming out of the woodwork" and markets doubting the U.S. Federal Reserve's plan to engineer a "soft landing" for the economy as it hikes interest rates to fight inflation, market experts said,” mentioned Reuters. On the same line were comments from International Monetary Fund’s (IMF) Asia-Pacific Director Changyong Rhee who said, “The US has the room to raise interest rates.” IMF’s Rhee also mentioned that Asia’s inflation will peak in Q2 of this year.

Firmer yields help the US dollar Index (DXY) print a three-day uptrend around 98.70 while disappointing the riskier assets like commodities and Antipodeans, including gold.

It’s worth noting that the fears of an escalation in the Ukraine-Russia crisis and China's covid resurgence challenge the XAU/USD bears. Recently, Ukraine President Volodymyr Zelenskyy mentioned that no immediate decision is possible on occupied Ukrainian territory per Interfax. Additionally, US President Joe Biden also cited fears of a cyberattack against the US.

Looking forward, gold prices are likely to remain sidelined as firmer yields battle the traditional safe-haven status, which in turn highlight incoming US data and Fedspeak as the key catalysts.

Technical analysis

Gold prices keep the bounce off 50% Fibonacci retracement (Fibo.) of September 2021 to March 2022 upside amid steady RSI and bearish MACD signals by the press time.

That said, the 21-DMA around $1,945 restricts short-term advances of the yellow metal ahead of the previous support line from early February, near $1,987 at the latest.

In a case where gold prices rally beyond $1,987, the $2,000 threshold will act as the key hurdle to the north.

Alternatively, pullback moves may retest the 50% Fibo. level surrounding $1,895 but a convergence of the 50-DMA and a horizontal area since November 2021 highlights $1,877-80 as the key short-term support zone.

To sum up, gold prices remain indecisive between the $1,877 and $1987 trading range.

Gold: Daily chart

Trend: Sideways