Gold Price Forecast: XAU/USD rebound needs validation from $1,730 and Fed Chair Powell

• Gold price bounces off intraday low, snaps two-day downtrend as traders await FOMC.
• US dollar retreat amid headlines concerning US-China ties, European energy crisis.
• Fears that Fed’s Powell will take harsh measures to tame inflation keep XAU/USD bulls in check.

Gold price (XAU/USD) recovers from intraday low as traders consolidate recent losses during Wednesday’s sluggish morning in Europe. That said, the yellow metal picks up bids to $1,719 amid cautious optimism, as well as the US dollar’s pullback, ahead of the US Federal Reserve’s (Fed) monetary policy meeting.

That said, the US Dollar Index (DXY) marks the biggest daily loss in 12 days, down 0.30% intraday around 106.90 by the press time, as risk appetite improves amid chatters surrounding the US-China ties and the European energy crisis.

While portraying the mood, the S&P 500 Futures rise 0.85% intraday whereas the US 10-year Treasury yields rise 2.0 basis points (bps) to 2.80% at the latest.

The absence of pre-Fed risk-aversion and firmer US stock futures, not to forget cautious optimism surrounding the US President’s readiness for a virtual meeting with his Chinese counterpart Xi Jinping, appear to have favored the market’s risk-on mood of late. On the same line could be the headlines raising hopes that the region’s policymakers are also in talks with Iran and Nigeria to acquire energy resources. Recently, Germany’s Gas Regulator's Chief said, per Reuters, that the next phase of a gas emergency may not need to be triggered in the coming days and weeks as long as we can still add gas to storage.

Moving on, risk catalysts and the US Durable Goods Orders for June, expected -0.4% versus 0.8% prior, could entertain gold traders ahead of the Federal Open Market Committee (FOMC) meeting. It should be observed that the market has already priced in the Fed’s 75 basis points (bps) rate hike and hence Fed Chair Powell needs to do more to lure the XAU/USD bears.

Technical analysis

Although 50-SMA restricts the immediate downside of the gold price to around $1,713, bearish MACD signals and the 100-SMA challenge the XAU/USD buyers unless crossing the $1,727 hurdle.

Even so, 50% and 61.8% Fibonacci retracements of July 04-21 fall, around $1,748 and $1,764 in that order, challenges the metal buyers before giving them control.

On the contrary, a clear downside of the 50-SMA support near $1,713 isn’t an open invitation to the gold sellers as a two-week-old horizontal support zone around $1,697-98 probes the metal’s additional south-run before directing the bears to the yearly low of $1,680.

It should be noted, however, that the metal’s weakness past $1,680 could make it vulnerable to test the 61.8% Fibonacci Expansion (FE) of July 04-22 moves, near $1,655.

Gold: Four-hour chart

Trend: Limited upside expected