Gold Price Forecast: XAU/USD stays pressured towards $1,755 ahead of Fed Minutes

• Gold price holds lower ground near one-week low after two-day downtrend.
• Mixed sentiment, anxiety ahead of Fed Minutes kept XAU/USD on the back foot.
• Recession talks gained major attention, China, Europe in focus.
• FOMC Minutes will be eyed closely to confirm 75 bps rate hike in September.

Gold price (XAU/USD) prints a three-day downtrend as it grinds lower around $1,775 during the initial hours of Wednesday’s Asian session. In doing so, the precious metal fades the late Tuesday’s bounce off $1,772 as traders turn cautious ahead of today’s key Federal Open Market Committee (FOMC) meeting minutes.

That said, fears of economic slowdown, mainly emanating from China and Europe, join firmer Treasury yields and positive equities to confuse the traders. It’s worth noting that the US dollar also retreated amid the market’s indecision.

US Dollar Index (DXY) refreshed its three-week high before reversing from 106.94. The greenback’s gauge versus six major currencies previously benefited from the flight to safety as China’s readiness for multiple measures to tame recession woes joined Europe’s signals to renew the nuclear deal with Iran while pushing back plans for the closure of Germany’s last three nuclear power plants. On the same line was the Washington Post (WaPo) news that mentioned that Chinese authorities ordered factories to suspend production in several major manufacturing regions to preserve electricity, as the country face the worst heat wave in six decades.

Elsewhere, US Industrial Production grew 0.6% in July versus 0.3% expected and upwardly revised 0.0% prior whereas Building Permits also increased to 1.674M MoM during the stated month versus 1.656 market expectations and 1.696M previous readings. It should be noted that the Housing Starts dropped to 1.446M from 1.599M prior and 1.54M expected. On a different page, UK’s employment numbers failed to impress traders while Canada’s inflation matched consensus. Further, ZEW Sentiment data from Germany and Europe came in weaker for Economic Sentiment but improved a bit for Current Situation.

Amid these plays, Wall Street managed to close on a positive side, despite retreating by the end of the day. That said, the US 10-year Treasury yields snapped a two-day downtrend by regaining 2.80% at the latest.

Moving on, headlines surrounding China and inflation may entertain XAU/USD traders but major attention will be given to the Minute Statement wherein traders are more interested in the hints of a 75 basis point (bps) rate hike in September.

Also read: FOMC July Minutes Preview: Can it influence September Fed rate hike expectations?

Technical analysis

Gold defends the early week's downside break of the 50-day EMA amid steady RSI and receding bullish bias of the MACD, suggesting further weakness in XAU/USD prices.

That said, the 23.6% Fibonacci retracement of the April-July downtrend, near $1,755, is likely immediate support for the yellow metal.

Following that, multiple levels around $1,740 and $1,710 could entertain the commodity bears ahead of targeting the yearly low near $1,680.

Meanwhile, the 50-EMA level near $1,784 restricts the immediate upside of the gold price before the 38.2% Fibonacci retracement level near $1,803.

It’s worth noting, however, that a convergence of the 200-EMA, descending trend line from late April and a one-month-old upward sloping resistance line highlight $1,820-25 as the key hurdle for the bulls to cross to retake control.

Gold: Daily chart

Trend: Further weakness expected