Gold Price Forecast: Bear flag, Fed’s Powell tease XAU/USD sellers, $1,750 in focus

• Gold price snaps three-day uptrend around weekly top.
• Cautious mood ahead of data, China-linked fears trigger XAU/USD pullback.
• Fed Chair Powell’s speech at Jackson Hole, US Core PCE Inflation data will be crucial for fresh impulse.
• Powell needs to defend rate hikes to keep gold sellers hopeful, US inflation figures may ease in July.

Gold price (XAU/USD) bounces off intraday low as sellers retreat from the crucial $1,750 support confluence during early Friday morning in Europe. Even so, the yellow metal prints the first daily loss in three around the week’s high.

The bullion’s latest weakness could be attributed to the market’s sour sentiment ahead of the Fed’s preferred inflation release and crucial Jackson Hole speech. Adding to the sour sentiment could be the headlines surrounding China, Iran and Taiwan.

News that China’s county near Beijing declared lockdown due to covid joined the US suspension of 26 Chinese carrier flights in response to Beijing’s action to weigh on the risk appetite. Also, an increased military budget, a jump in the number of US diplomats visiting Taipei and US President Joe Biden’s hard stand on Iran’s position in Syria appears to have exerted additional downside pressure on the market sentiment.

It’s worth noting that the mixed US data and Fedspeak joined a slump in the US Treasury yields to underpin the metal’s previous run-up. That said, the second estimate of the US Gross Domestic Product (GDP) Annualized improved to -0.6% in the second quarter (Q2) versus -0.9% flash estimations and -0.8% market forecasts. Further, US Initial Jobless Claims dropped to the lowest levels in seven weeks, to 243K for the week ended on August 19 versus 253K expected and a revised down prior of 245K.

On the other hand, Kansas City Fed President Esther George said on Thursday, "For the near-term thinking about higher interest rates seems reasonable to me." The policymaker also mentioned that (it’s) too soon to say what to expect in September (as) more key data coming. Philadelphia Fed President Patrick Harker was on the same line while he noted, per Reuters, that he wants to see the next inflation reading before deciding on the September rate decision but added that a 50 basis points rate hike would still be a substantial move. Also, Atlanta Fed President Raphael Bostic said to the Wall Street Journal (WSJ) that “at this point, I'd toss a coin between 50 bps and 75 bps,” adding that “if data remains strong and inflation doesn't soften, it may make a case for another 75 bps.

Also favoring the metal prices was China’s near one trillion stimulus and a holistic approach by the domestic institutions to safeguard the world’s second-largest economy.

Against this backdrop, the S&P 500 Futures part ways from Wall Street’s gains and print mild losses around 4,195. Additionally portraying the risk-off mood is the two basis points (bps) of an increase in the US 10-year Treasury yields, at 3.045% by the press time.

Moving on, XAU/USD traders may witness the inactive session ahead of Fed Chair Powell’s speech at the Jackson Hole. However, the US Core Personal Consumption Expenditure (PCE) Price Index, the Fed’s preferred inflation gauge, may entertain the traders. Forecasts suggest that the YoY print is to ease to 4.7% from 4.8% while the monthly figures may drop to 0.3% while 0.6% prior.

Technical analysis

Gold price remains inside a two-week-old bearish chart pattern as sellers attack the confirmation level surrounding $1,750. Adding strength to the flag’s support is the 50-HMA level and steady RSI (14).

In a case where the quote drops below $1,750, the theoretical slump towards the yearly low near $1,680 could avail the monthly bottom of $1,727 and the $1,700 threshold as intermediate halts.

Meanwhile, recovery moves could aim for the flag’s upper line, around $1,771 by the press time, before aiming for the monthly high near $1,808.

Overall, gold prices are likely to remain pressured but a confirmation from the $1,750 support becomes necessary to convince bears.

Gold: Hourly chart

Trend: Further weakness expected