Gold Price Forecast: XAU/USD to resume its downside journey amid hawkish Fed bets - Confluence Detector

• Gold price is showing a sheer volatility contraction after a recovery move.
• The upside in the Gold price looks capped amid a solid recovery in the USD Index.
• Investors have channelized their funds into the USD Index as the Fed is expected to raise rates.

Gold price (XAU/USD) is demonstrating a sheer contraction in volatility after a recovery move from $1,980.00. The yellow metal is struggling to extend its recovery as the US Dollar Index (DXY) has rebounded firmly after defending the critical support of 101.65.

Investors have channelized their funds into the USD Index considering its safe-haven appeal as the Federal Reserve (Fed) is expected to raise rates to weigh more pressure on stubborn inflation. The demand for USD Index looks feasible for the short term as United States inflation has softened dramatically and labor market conditions have loosened further. 

Meanwhile, retail demand by households has also dropped amid higher costs of financing and tight credit conditions by US commercial banks. The wholesome scenario indicates that the Fed won’t extend rates further vigorously and will consider a pause in the same to avoid indulgence of the economy into recession. But, in the current scenario, more rate hikes cannot be ruled out.

Considering the recovery in the USD Index, the demand for US government bonds has dented again, which has resumed the upside journey of US Treasury yields. The yields offered on 10-year US Treasury bonds have jumped above 3.58%.

Also Read: Gold Price Forecast: XAU/USD juggles above $2,000, US Dollar softens despite hawkish Fed bets

Gold Price: Key levels to watch

Gold price could get attracted to bears if it drops below the daily 20-period Exponential Moving Average (EMA) at $1,990.00. A downside move below the previous day's low would expose the yellow metal to weekly Pivot 1 support at $1,980.00. More downside will be exposed on the further breakdown to monthly 23.6% Fibonacci retracement support at $1,964.62.

On the contrary, The Technical Confluence Indicator conveys that the Gold price would reclaim the ultimate resistance of $2,052.00, which is the previous week’s high and first monthly pivot resistance. For that, the Gold price needs to climb above the previous month's high of $2,010.50 with sheer momentum, which will direct it to the resistance of the weekly 23.6% Fibonacci retracement at $2,035.50.

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About Technical Confluences Detector

The TCD (Technical Confluences Detector) is a tool to locate and point out those price levels where there is a congestion of indicators, moving averages, Fibonacci levels, Pivot Points, etc.  If you are a short-term trader, you will find entry points for counter-trend strategies and hunt a few points at a time. If you are a medium-to-long-term trader, this tool will allow you to know in advance the price levels where a medium-to-long-term trend may stop and rest, where to unwind positions, or where to increase your position size.