Gold Price Forecast: XAU/USD bears eye $1,750 on rising wedge confirmation, firmer USD

• Gold price remains pressured after confirming a bearish chart pattern.
• US dollar regains upside momentum amid growth concerns, cautious mood ahead of FOMC Minutes.
• Recession fears from China, softer US data weighed on the XAU/USD prices.
• Second-tier US data can entertain traders ahead of Fed Minutes.

Gold price (XAU/USD) keeps the previous day’s downside break of the fortnight-old rising wedge while flashing $1,780 as a quote during the early Asian session on Tuesday. The yellow metal’s latest losses could be linked to the US dollar’s sustained rebound, as well as the cautious mood ahead of Wednesday’s Federal Open Market Committee (FOMC) meeting minutes.

US Dollar Index (DXY) posted the biggest daily gains in a week as the greenback’s gauge versus the six major currencies cheered the market’s fears of recession, as well as concerns surrounding the Fed’s next move.

That said, the downbeat print of the US NY Empire State Manufacturing Index for August, to 31.3 in August from 11.1 in July and 8.5 market forecasts, contributed to the economic slowdown fears. On the same line, the US August NAHB homebuilder confidence index also fell to 49 versus 55, its lowest level since the initial months of 2020.

It should be noted that the softer than expected prints of China’s Retail Sales, Industrial Production and a lack of demand for the loaned funds joined the People’s Bank of China’s (PBOC) surprise rate cut to amplify the growth fears from the world’s biggest commodity user.

Elsewhere, headlines suggesting improved coronavirus conditions in China's financial hub Shanghai and the resumption of the Russian bonds’ trading on Wall Street should have favored the risk appetite, but could not. Furthermore, hopes of a probable meeting between US President Joe Biden and his Chinese counterpart Xi Jinping, as signaled by the Wall Street Journal (WSJ), could favor the risk-on mood. On the same line were comments from China’s President Xi suggesting more efforts to revive the world’s second-largest economy.

Amid these plays, the US 10-year Treasury yields dropped six basis points (bps) to 2.79% whereas Wall Street closed with mild gains.

Moving on, the second-tier US data concerning housing and activities could entertain the gold traders but major attention will be given to how the Fed can defend its hawkish stand in the Minutes amid recession fears and softer inflation data.

Technical analysis

Gold price justifies a confirmation of the two-week-old rising wedge bearish chart pattern by taking rounds to the 50% Fibonacci retracement of the June-July downside, near $1,780. The bearish bias also takes clues from the downbeat RSI (14), not oversold, as well as failures to extend the latest corrective pullback from beyond the 50-SMA.

That said, the XAU/USD bears presently aim for the convergence of the 200-SMA and 38.2% Fibonacci retracement, around $1,753. However, multiple supports around $1,730 and the $1,700 threshold could challenge the metal’s further downside amid likely oversold RSI.

Should the precious metal continues to decline past $1,700, the odds of its slump to the yearly low surrounding $1,680 can’t be ruled out.

Alternatively, a 50-SMA level surrounding $1,785-86 guards the quote’s immediate recovery ahead of the quote’s run-up towards the stated wedge’s lower line, close to $1,795 by the press time.

Following that, the $1,800 threshold and the 61.8% Fibonacci retracement level surrounding $1,805 could test the gold buyers before challenging the wedge’s upper line near $1,815.

Overall, XAU/USD remains on the bear’s radar despite the late Monday’s bounce off $1,773.

Gold: Four-hour chart

Trend: Further weakness expected