Gold Price Forecast: XAU/USD bears stay in control into weekly demand area

• Gold bears stay in charge and take on a weekly support structure. 
• The bulls could be looking to move in at this juncture for arestest of prior lows. 

Gold is flat on Tuesday and is stuck in between the $1,862.40 lows and $1,864.39 highs so far. S firm USD and soaring Treasury yields continue to weigh on the price of the yellow metal.  Gold dropped around  2% in Monday’s session with readers in anticipation of the Fed will aggressively tighten monetary policy late this week.

The outlook for investment demand remains muted, with gold bugs staring down the barrel of a hawkish Fed, while safe-haven flows associated with the war in Ukraine dries up.

''The market is pricing in nearly 75bp rise in rates in June. However, the rally in the USD is providing the biggest headwind for the gold price,'' analysts at ANZ Bank said. 

''The US Dollar Index has rallied from 98 to 103 in April amid the prospect of higher interest rates. This has offset gains in safe-haven demand amid the Ukraine war and broad weakness in the economic backdrop.''

Meanwhile, the US dollar held just below a 20-year high against a basket of currencies on Monday before an expected rate hike. The potential for the US central bank to adopt an even more hawkish tone than many expect.

The Fed is expected to hike rates 50 bp to 1.0% Wednesday. While there will be no new forecasts until the June 14-15 FOMC meeting, another 50 bp hike is widely expected then also. In fact, as analysts at Brown Brothers Harriman note, WIRP suggests nearly 50% odds of a 75 bp hike then. 

''Looking further out,'' the analysts said, ''the swaps market is now pricing in 300 bp of tightening over the next 12 months that would see the Fed Funds rate peak near 3.5%. Because of the media blackout, there are no Fed speakers until Chair Jerome Powell’s post-decision press conference Wednesday afternoon.'' 

Meanwhile, a contingent of participants also expects the Fed's ability to constrain supply-side inflation is limited, which argues for a stagflationary regime in which gold will be in high demand as a store-of-value, analysts at TD Securities argued.

''However,'' they said, ''the decline in prices is rather nodding to a growing cohort which expects that the last month's inflation print may have marked the peak.''

Nevertheless, the analysts argued that ''with Comex shorts largely wiped out, we've argued that the right tail in gold prices is narrow as few participants remain willing to buy gold in this context.''

Gold technical analysis

The following illustrates the market structure across the weekly time frame putting some perspective on the recent price action, arriving at a bearish bias longer term.

Gold weekly chart

The weekly chart shows the price attempting to break out to the downside, so far being held up at the weekly structure. This leaves prospects of a meanwhile bullish correction to retest the prior lows.