Gold Price Forecast: XAU/USD eyes seventh monthly loss around $1,650 as hawkish Fed bets propel DXY

• Gold price drops for the third consecutive day after reversing from 21-DMA.
• Headlines concerning China, Russia weigh on risk appetite amid mixed data.
• Friday’s US inflation numbers propel Fed bets but hints for December’s move will be crucial for XAU/USD buyers to trace.

Gold price (XAU/USD) holds lower ground near $1,640 heading into Monday’s European session, printing three-day losing streak while bracing for the seventh monthly fall.

In doing so, the bright metal justifies the market’s rush for risk safety ahead of the key central bank announcements. Other than the pre-Fed anxiety, the geopolitical risk emanating from Russia and China’s covid woes join downbeat PMIs from Beijing to exert downside pressure on the XAU/USD prices.

China’s official NBS Manufacturing PMI for October dropped to 49.2 versus 50.0 expected and 50.1 prior. Further, the Non-Manufacturing PMI also slumped to 48.7 compared to 51.9 market forecasts and 50.6 previous readings. “China's factory activity unexpectedly fell in October, an official survey showed on Monday, weighed by softening global demand and strict COVID-19 restrictions, which hit production,” said Reuters following the data.

Macau’s lockdown of a casino resort and fears emanating from Russia’s retreat from the grain deal gain major attention when it comes to the risk-negative catalysts. On the same line were 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 in December to challenge the XAU/USD bears.

Amid these plays, the US 10-year Treasury yields seesaw near 4.00% after snapping the 10-week uptrend while the US equity future prints mild losses even after Dow Jones braces for the biggest monthly jump since 1976.

Moving on, the second-tier US activity numbers and the aforementioned risk catalysts could weigh on the XAU/USD prices. Even so, the Fed’s rejection to bow down keeps the gold bears hopeful.

Technical analysis

In addition to a successful U-turn from the 21-DMA hurdle, around $1,667, the gold buyers should also cross a downward-sloping resistance line from August, close to $1,695, to retake control. It should be noted that the 10-DMA level surrounding $1,649 guards immediate recovery of the XAU/USD.

Meanwhile, $1,630 acts as a nearby support before directing the bears towards a monthly support line, close to $1,617 by the press time. Following that, a downward trajectory towards the yearly low near $1,614 and the $1,600 threshold can’t be ruled out.

Overall, the gold price remains on the bear’s radar but the downside appears limited, which in turn highlights the Fed’s monetary policy announcements as the key catalyst.

Gold: Daily chart

Trend: Further weakness expected