Gold Price Forecast: XAU/USD Plummets Amid US Dollar Demand

The price of gold has fallen sharply and hit a two-week low, with XAU/USD trading at around $1,970, down 1.75% for the day. The fall in the price of gold has been driven by resurgent demand for the US dollar, which has benefited from rising bond yields. The US central bank, the Federal Reserve (Fed), has been signalling further rate hikes, which have weighed on gold prices, along with concerns about economic headwinds stemming from rising borrowing costs.

The risk-off mood has failed to lend any support to the safe-haven XAU/USD, despite a generally weaker tone around equity markets. This suggests that the near-term outlook for the metal is bearish. From a technical perspective, a sustained break below the $1,980 horizontal support could trigger further declines. Oscillators on the daily chart have just started drifting into negative territory, supporting the prospects for further downward momentum.

Investors will be closely watching the release of the Fed’s Beige Book for the central bank’s take on the state of the US economy. This, along with US bond yields, will influence the US dollar and provide some impetus to the gold price. Traders will also take cues from the broader risk sentiment ahead of speeches by FOMC members on Thursday.

Key levels to watch for XAU/USD include a break below $1,980, which would trigger bearish momentum, and resistance at $2,000 and $2,010, which could prompt some short-covering if cleared decisively. The price of gold could then aim to surpass the $2,020 intermediate hurdle and climb back to the $2,040 horizontal resistance en route to the year-to-date peak around the $2,047-$2,049 region.

In conclusion, the outlook for gold prices remains bearish in the short term, as resurgent demand for the US dollar weighs on the precious metal. However, the release of the Fed’s Beige Book and speeches by FOMC members could provide some impetus for short-term traders.