Gold Price Forecast: XAU/USD slides towards $1,638 support on firmer DXY ahead of Fed’s verdict, US NFP

• Gold price holds lower grind near intraday bottom, prints three-day downtrend around weekly horizontal support.
• Sour sentiment, hawkish Fed bets underpin US dollar as traders brace for the key data/events.
• Fed’s 75 bps move is price-in but clues for December will be crucial to watch for XAU/USD bears.

Gold price (XAU/USD) remains pressured towards $1,638 horizontal support during Monday’s Asian session, mildly offered by the press time. The yellow metal’s latest weakness could be linked to the US dollar’s broad strength amid the market’s risk-off mood, as well as anxiety ahead of the Federal Open Market Committee (FOMC) meeting results and the US jobs report for October.

While portraying the mood, the US Treasury yields are directionless after a downbeat weak and the US equity future print mild losses even after Dow Jones braces the biggest monthly jump since 1976. Further, the US Dollar Index (DXY) prints a three-day uptrend around 110.80, up 0.10% intraday by the press time.

Headlines surrounding the Russia-Ukraine grain deal with the United Nations (UN) seem to have challenged the risk appetite of late. “Russia, which invaded Ukraine on Feb. 24, halted its role in the Black Sea deal on Saturday for an ‘indefinite term’ because it could said it could not ‘guarantee safety of civilian ships’ traveling under the pact after an attack on its Black Sea fleet,” reported Reuters.

Also exerting downside pressure on the gold price could be Friday’s strong prints of the Fed’s preferred inflation gauge, namely the US Core Personal Consumption Expenditures (PCE) Price Index. However, the fifth quarterly fall in the US private consumption joins fears of the US Federal Reserve’s (Fed) slower rate hike starting from December to challenge the US dollar bulls. That said, economists at Goldman Sachs raised the Fed rates outlook and saw the peak at 5% in March. On the same line was the CME’s FedWatch Tool which suggests an 80% chance of the Fed’s 75 bps rate hike.

To sum up, gold prices are likely to remain pressured even as the market players expect hints of slower rate hikes from December during Wednesday’s FOMC.

Technical analysis

A sustained downside break of the 50-SMA joins bearish MACD signals and softer RSI (14), not oversold, to keep gold sellers hopeful of conquering the one-week-old horizontal support of around $1,638. Following that, a south-run towards the yearly low surrounding $1,614 and the $1,600 round figure appears on the table.

Meanwhile, an upside clearance of the 50-SMA resistance near $1,648 could trigger the XAU/USD rebound targeting the 200-SMA, around $1,665 by the press time. However, the 50% Fibonacci retracement of the pair’s September 12-28 downside, close to $1,675, precedes the monthly peak of $1,730, to challenge the gold buyers afterward.

Overall, gold remains bearish at the start of the key week.

Gold: Four-hour chart

Trend: Further downside expected