Gold Price Forecast: XAU/USD stays defensive above $1,800 amid sluggish USD, inactive markets

• Gold price remains sidelined after reversing from 200-DMA.
• Risk-on mood fades amid a lackluster session as Fedspeak joins with not-so-impressive data.
• Second-tier economic details, headlines concerning Russia, coronavirus will be important for fresh directions.
• Gold Price Forecast: Bears ready to jump in at higher levels

Gold (XAU/USD) prices retreat from intraday high, staying range-bound near $1,813-18, as global markets struggle for clear directions to extend the previous optimism. In doing so, the precious metal keeps the previous day’s pullback from the 200-DMA during a lackluster Asian session on Wednesday.

Market sentiment dwindles as the recent Fedspeak seems more hawkish than the earlier ones while headlines concerning the EU’s oil embargo on Russian imports, as well as China’s covid conditions, test optimists. Even so, firmer growth numbers from Japan and Eurozone, upbeat Retail Sales from the US and UK’s strong jobs report keeping traders hopeful.

Fed’s Evans seems to have weighed on the market’s mood by renewing fears of a faster rate hike as the policymaker said, “(the Fed) Should raise rates to 2.25%-2.5% neutral range 'expeditiously'.” On Tuesday, Fed Chair Jerome Powell and a generally-hawkish St Louis Fed President James Bullard pushed for a 50 bps rate hike and weighed on the USD.

Talking about the data, the preliminary Eurozone GDP for Q1 2022 rose past 5.0% YoY to 5.1% while also rising above 0.2% QoQ expectations to 0.3%. On the other hand, the US Retail Sales rose at a pace of 0.9% MoM in April, slightly better than the expected pace of 0.7% but softer than the upwardly revised 1.4% growth (from 0.5%). Recently, Japan’s preliminary readings of Q1 2022 GDP rose past -0.4% expectations to -0.2% QoQ whereas the Annualized GDP improved to -1.0% versus -1.8% forecasted.

On a different page, the Financial Times (FT) news that China diverts anti-poverty funds to covid testing as the crisis deepens joins the chatters over the European Commission’s (EC) plan to move away from Russian energy imports weighing on the market’s mood.

Against this backdrop, the US 10-year Treasury yields rose 0.5 basis points (bps) to 2.988% whereas the S&P 500 Futures struggle for clear directions even as Wall Street posted heavy gains.

That said, gold traders may witness further declines should the US Dollar Index benefits from the latest cautious optimism, currently unchanged near 103.35. In doing so, the greenback gauge may take clues from the second-tier housing numbers and qualitative factors concerning coronavirus and geopolitics.

Technical analysis

Gold prices keep the previous day’s pullback from 200-DMA despite staying inside a $5.00 trading range of late.

Given the bearish MACD signals and the metal’s failures to cross the key moving average, around $1,838 by the press time, XAU/USD may revisit a yearly horizontal support area near $1,790-85.

However, a clear downside break of the $1,800 threshold becomes necessary for the bears before aiming at the yearly support.

Alternatively, a successful run-up beyond the 200-DMA level of $1,838, won’t be an open invitation to gold buyers as a downward sloping trend line from late April and multiple resistances from January 25, respectively around $1,845 and $1,855, will probe bulls afterward.

Gold: Daily chart

Trend: Pullback expected