Gold Price Forecast: XAU/USD bears move in at a key 61.8% ratio

• Gold is attempting to recover but the bears are lurking below $1,640.
• A 61.8% resistance ratio could be the catalyst for the next bearish impulse.  

The gold price is higher on the day as we head into the close of Wall Street. The yellow metal gained ground on Tuesday as bulls moved in at the lowest levels in more than two years scored on the back of a surging US dollar and bond yields that are both making multi-year highs. At the time of writing, the gold price is trading 0.38% higher having climbed from a low of $1,621.91 and reaching a high of $1,642.45 after falling a day earlier to the lowest since March 2020.

The gold price is trading below pandemic-era levels and as rates markets are now pricing the potential for higher interest rates to persist for some time, while a steady stream of Fedspeak is likely to hammer this point home, analysts at TD Securities argue that gold prices could still have further to fall in the next stage of the hiking cycle.

''Indeed, the increase in inflation's persistence suggests that a restrictive regime may last longer than historical precedents, which argues for a more pronounced weakness. The combination of surging real rates and USD, continued outflows from money managers and ETF holdings are all adding pressure on family offices and prop shops to finally capitulate on their length,'' the analysts explained. 

A chorus of Fed speakers advocated more interest rate hikes even at the risk of slowing economic growth on Tuesday. Late in the day, a voter in 2023, Philadelphia Federal Reserve President Patrick Harker on Friday said he believes the US central bank can bring down inflation without triggering a deep recession and hefty unemployment.

"We don't want to do this in a way that squashes the job market right now," Harker told Bloomberg TV from Jackson, Wyoming, where Fed officials have gathered for a conference. "If there is a recession, it would be shallow," he said.

Federal Reserve policymakers St. Louis Fed President James Bullard and Chicago Fed President Charles Evan advocated more interest rate hikes even at the risk of slowing economic growth. Later in the day, Minneapolis Federal Reserve Bank President Neel Kashkari on Tuesday said in a WSJ Live interview that central bankers are united in their determination to do what needs to be done to bring inflation down, and financial markets understand that. "There's a lot of tightening in the pipeline," Kashkari said.

Meanwhile, the benchmark S&P 500 erased gains of up to 1.7% by early afternoon trading to hit lows last seen in late November 2020. It is headed for a negative close. The US dollar, as measured by the DXY index, is back to trading in the 114 area below 114.47 as the highs of the day.

Gold technical analysis

The price has corrected to a 4-hour resistance in a 61.8% ratio correction. This could lead to another test of the lows and a subsequent lower low if $1,621.20 gives way to the bears.