Gold Price Forecast: XAUUSD Is Being Offered and Is Approaching Critical Support

Gold prices have been under pressure in Tokyo and have fallen to a new Asian session low of $1,927.50c, down 0.2 percent at the time of writing. The US dollar is firming at an hourly support level as the euro begins to stall on its opening bid following the French election results.

The XAU/USD bears are in early doors as the focus continues on the Federal Reserve, with market investors bracing for a faster-than-expected rate of reversion to neutral rates by the central bank.

"Rates continue to reprice higher as the market pencils in another rate hike in 2022, pricing in 10 additional hikes over the course of the year, implying a bigger overshoot of neutral. While gold prices have remained extremely resilient in the face of an aggressively hawkish Federal Reserve, as a protracted war in Ukraine simultaneously increased geopolitical uncertainty and inflation risks, fueling demand for safe havens, we see few participants remaining with an appetite to buy gold," TD Securities analysts said.

Fed Chairman Jerome Powell proposed a 50 basis point (bps) interest rate hike in his presentation to the International Monetary Fund (IMF) on Thursday. This has increased the likelihood of the Fed announcing a big rate hike in May monetary policy. Additionally, Powell stated that the US economy's multi-decade high inflation requires a rapid pace of interest rate hikes, implying that investors should brace for more than one 50 basis point rate hike announcement this year. Additionally, the market's risk-aversion trend is supporting the greenback versus the precious metal.

Technical Analysis of Gold

On an hourly basis, XAU/USD is bouncing below the 61.8 percent Fibonacci retracement level at $1,931.56 (which corresponds to the March 29 low of $1,890.21 and last week's high of $1,998.43). The 20- and 50-period Exponential Moving Averages (EMAs) are contracting, confirming the downside tendency. Meanwhile, the Relative Strength Index (RSI) (14) has moved into a bearish area of 20.00-40.00, indicating the possibility of a new bearish impulsive wave. 

Gold Hourly Chart