Gold Price Forecast: XAU/USD extends Fed-inspired losses below $1,650 amid looming death cross

Gold price takes offers to refresh intraday low, stretches U-turn from one-week high.
Hawkish comments from Fed Chair Powell propelled US dollar, geopolitical/covid woes also weigh on XAU/USD.
US ISM Services PMI, NFP will be crucial for near-term directions.

Gold price (XAU/USD) renews its intraday low near $1,632 while extending the post-Fed slump during Thursday’s Asian session. In doing so, the quote takes clues from the recently deteriorating market sentiment amid a light calendar.

North Korea’s firing of missiles and Japan’s warning to residents appear the latest blow to the risk appetite, which in turn weighed on the gold price. On the same line could be the coronavirus fears from China as the lockdown surrounding the area involving the world’s largest iPhone factory defied hopes of easing the dragon nation’s zero-covid policy.

On Wednesday, Fed’s 75 bps increase in the benchmark rate initially triggered the US dollar’s slump as the rate statement highlighted the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments. However, Powell’s speech propelled the greenback as it cited the need to bring down inflation “decisively” while also suggesting a bit longer play for the restrictive policy.

Elsewhere, fears of economic slowdown in the UK and Eurozone, as well as higher rates intensify ahead of Thursday’s Bank of England (BOE) meeting, which in turn keeps markets dicey and exerts downside pressure on the XAU/USD.

Amid these plays, the US Treasury Yields are back near the multi-month high above 4.0% while the Wall Street benchmarks closed in the red. Further, the S&P 500 Futures print mild losses at the latest.

Looking forward, China’s Caixin Services PMI for October, prior 49.3, will offer immediate directions along with the risk catalysts. However, major attention will be given to the US ISM Services PMI as it bears downbeat forecasts of 55.5 for October compared to 56.7 previous readings. Following that, Friday’s US Nonfarm Payrolls (NFP) will be the key, mainly due to the strong ADP data.

Technical analysis

A swift pullback from a weekly top joins bearish MACD signals to highlight the impending death cross as the 100-HMA pokes the 50-HMA from above. With this, the gold price drops towards the weekly bottom of $1,630 before targeting the previous monthly low near $1,617.

In a case where XAU/USD remains bearish past $1,617, the year’s low marked in September around $1,614 and the $1,600 threshold could lure the bears.

Alternatively, recovery remains elusive unless crossing the stated HMA confluence surrounding $1,647. Following that, $1,657 and $1,670 will be on the buyer’s radar.

Overall, gold is likely to decline further but the downside appears limited.