Gold Price Forecast: XAU/USD bears eye $1,715-12 on hawkish Fedspeak, focus on US NFP

• Gold price remains pressured towards short-term key horizontal support area on breaking five-week-old support line.
• Fed policymakers’ determination for high rates join economic, geopolitical fears to also weigh on the XAU/USD prices.
• Second-tier data, Fedspeak can direct short-term moves ahead of Friday’s US NFP.
• Hawkish policymakers, challenges to risk exert downside pressure on gold price.

Gold price (XAU/USD) remains pressured at around $1,734, after breaking a short-term key support line the previous day. In doing so, the precious metal justifies the US dollar’s safe-haven demand amid mixed data, recession fears and hawkish Fedspeak during Monday’s sluggish Asian session.

Starting with the Fed policymakers’ speeches at the annual Jackson Hole Symposium, Fed Chairman Jerome Powell said, “Restoring price stability will take some time, require using central bank's tools 'forcefully'.” The policymaker also stated that restoring price stability will likely require maintaining a restrictive policy stance for 'some time'. Mostly on the same line was Federal Reserve Bank President Loretta Mester who stated that she would base her decision on whether to back a third straight 75-basis point interest rate hike next month on US inflation data, not the closely-watched jobs report.

It should be observed that the hawkish Fed concerns amplified recession woes. That said, US Senator Elizabeth Warren said on Sunday, per Reuters, that she was very worried that the Federal Reserve was going to tip the US economy into recession.

Furthermore, a study presented at the Jackson Hole Symposium stated that the central banks will fail to control inflation and could even push price growth higher unless governments start playing their part with more prudent budget policies. "If the monetary tightening is not supported by the expectation of appropriate fiscal adjustments, the deterioration of fiscal imbalances leads to even higher inflationary pressure," said Francesco Bianchi of Johns Hopkins University and Leonardo Melosi of the Chicago Fed.

On a different page, escalating geopolitical tensions between the US and China also add strength to the DXY, which in turn weighs on the gold prices. China's military said on Sunday, per Reuters, that it was monitoring US Navy vessels sailing through the Taiwan Strait, maintaining a high alert and ready to defeat any provocations.

Amid these plays, Wall Street benchmarks dropped more than 3.0% each while the US 10-year Treasury yields printed mild gains to end the week around 3.04%. The S&P 500 Futures track Wall Street as it drops more than 1.0% by the press time.

Given the risk-off mood and firmer US dollar, the XAU/USD prices are likely to remain pressured towards the short-term key support area. However, the bears have limited downside room and there are key data ahead, including Friday’s US jobs report for August, which in turn could test the metal bears going forward.

Technical analysis

A clear downside break of the five-week-old ascending trend line directs XAU/USD bears towards the horizontal area comprising multiple levels marked since mid-July, around $1,715-12.

It’s worth noting, however, that the RSI conditions could challenge the XAU/USD pair’s further downside past $1,712, if not then the $1,700 threshold might appear as the last defense of bulls before highlighting the yearly low near $1,680.

On the flip side, the support-turned-resistance line near $1,740 precedes the 10-DMA and the 50-DMA, respectively around $1,751 and $1,763, to restrict short-term gold price upside.

Following that, a downward sloping resistance line from early June, around $1,788, appears a tough nut to crack for the XAU/USD bulls.

Gold: Daily chart

Trend: Further downside expected