Gold Price Forecast: XAUUSD breaks below $1,800, bears gearing up to challenge YTD low

• A combination of factors dragged gold below the $1,800 mark, or its lowest level since May 16.
• Aggressive Fed rate hike bets and a goodish pickup in the USD demand exerted some pressure.
• Recession fears and the risk-off mood did little to lend any support to the safe-haven XAUUSD.

Gold prolonged this week's bearish trend and witnessed heavy follow-through selling on Friday, marking the fifth successive day of a negative move. The downward trajectory extended through the early part of the European session and dragged spot prices to the lowest level since May 16, around the $1,792 region in the last hour.

The prospects for more aggressive rate hikes by the US central bank were reaffirmed by Fed Chair Jerome Powell's remarks on Wednesday, saying that the US economy is well-positioned to handle tighter policy. Speaking at the ECB Forum in Sintra, Powell added that the Fed remains focused on getting inflation under control and the market pricing is pretty close to the dot plot. This, in turn, continued driving flows away from the non-yielding gold. Apart from this, broad-based US dollar strength further exerted downward pressure on the dollar-denominated commodity.

The combination of factors overshadowed the prevalent risk-off environment, which tends to benefit the safe-haven precious metal. The market sentiment remains fragile amid concerns that rapidly rising rates and tightening financial conditions would pose challenges to global economic growth. Adding to this, the ongoing Russia-Ukraine war has been fueling fears about a possible recession. This, in turn, tempered investors' appetite for perceived riskier assets, though did little to impress bullish traders or ease the bearish pressure surrounding gold.

The anti-risk flow was reinforced by the recent slump in the US Treasury bond yields, which, again, failed to lend any support to the yellow metal. With the latest leg down, spot prices now seem to have confirmed a fresh bearish breakdown below the $1,800 round-figure mark. Furthermore, acceptance below the said handle might have already set the stage for an extension of the depreciating move towards the YTD low, around the $1,780 region. The downward trajectory could get extended towards the next relevant support near the $1,755-$1,750 zone. Traders now look forward to the release of the US ISM Manufacturing PMI for a fresh impetus.

Technical levels to watch