Forecast for Gold: XAU/USD wipes off Fed Minutes-inspired gains, $1,735 in sight

At the outset of Thursday's Asian trading day, the XAU/USD gold price continued to slide to a two-week low of $1,761. The recent inactivity of the precious metal may be related to the absence of significant data or occurrences. However, rising rates and geopolitical uncertainties, in addition to the widespread pessimism surrounding the US economy and Fed movements, have weighed on the XAU/USD exchange rate.

The 10-year US Treasury yield jumped to a new monthly high above 2.90%, the highest level in a week, which put pressure on Wall Street benchmarks and helped the US dollar recover from its drop following the release of the minutes from the Federal Open Market Committee (FOMC) meeting. Wednesday's North American trading session closed with gains of 0.18% for the US Dollar Index (DXY), bringing the index up to a level near 106.70.

According to the Fed Minutes, the officials were unanimous in their support for the 75 basis point rate hike in August, but they did anticipate a gradual reduction in the rate of future increases. The Minutes also suggested that Fed members were aware of the risk that the central bank could tighten more than was warranted.

In other news, July retail sales in the US showed no rise, compared to the 0.1% forecast and the 0.8% previously reported. However, 0.8% was reported for the Retail Sales Control Group, up from 0.6% originally reported and 0.7% previously (updated from 0.8%).

High inflation and high employment would certainly impose some pressure on labor and employment, Federal Reserve Governor Michelle Bowman remarked recently.

Furthermore, Chinese Premier Li Keqiang recently went off the grid when he urged local leaders from six important provinces that account for approximately 40% of the country's economy to strengthen pro-growth policies by publishing an open letter in the Communist Party's flagship newspaper People's Daily. President Xi Jinping and the National Development and Reform Commission (NDRC), the state planner, have previously signaled their willingness to take additional measures to allay recession fears.

Next, XAU/USD investors may find distraction in lower-tier US data as they focus on China, central banks, and economic worries while ignoring the rest of the world.

Technical Analysis

XAU/USD bears are aiming for the prior resistance line from April 18, which is now at $1,735 as of press time and would be reached by confirming the rising wedge bearish chart pattern and then trading below the 50-DMA and 21-DMA for an extended period of time.

The yearly low for the time being is around $1,680, but a clear breach below $1,735 will not hesitate to retest it.

Alternately, the 21-day moving average and the 50-day moving average both have their eyes on the immediate upside of the quote, around $1,765 and $1,776 respectively. The following support comes from the lower line of the aforementioned wedge, which is now at $1,809.