Gold Price Forecast: XAU/USD struggles near multi-month low, seems vulnerable to slide further

Gold price fails to preserve its modest intraday gains and hangs near a multi-month low.
Hawkish major central banks continue to act as a headwind for the non-yielding metal.
The US Dollar stands stall near a two-week high and contributes to the intraday downfall.

Gold price struggles to capitalize on its modest gains registered during the Asian session and turns lower for the fourth straight day on Thursday. The XAU/USD currently trades around the $1,905, just above its lowest level since mid-March touched on Wednesday and seems vulnerable to slide further.

Hawkish central banks continue to weigh on Gold price

A more hawkish outlook adopted by major central banks and the prospects for additional interest rate hikes continue to act as a headwind for the non-yielding Gold price. In fact, the European Central Bank (ECB) President Christine Lagarde said on Wednesday that inflation in the Eurozone had entered a new phase that could linger for some time. Lagarde further noted that it is unlikely that in the near future the central bank will be able to state with full confidence that the peak rates have been reached. Furthermore, the Bank of England (BoE) Governor Andrew Bailey, speaking at the ECB conference, hinted that rates could remain at peak levels for longer than traders currently expect.

Modest US Dollar strength further weighs on XAU/USD

Adding to this, Federal Reserve (Fed) Chair Jerome Powell reiterated that two rate increases are likely this year and did not rule out the possibility of a lift-off at the next policy meeting on July 25-26. Powell also said that he does not see inflation coming down to the Fed’s 2% target until 2025. This, in turn, assists the US Dollar (USD) to stand tall near a two-week high, which is seen as another factor exerting pressure on the Gold price. Tha said, worries about economic headwinds stemming from rapidly rising borrowing costs might hold back traders from placing aggressive bearish bets around the safe-haven precious metal and help limit any further losses, at least for the time being.

Focus remains glued to US PCE Price Index on Friday

Market participants now look forward to the US economic docket, featuring the final Q1 GDP print, the usual Weekly Initial Jobless Claims and Pending Home Sales data, due later during the early North American session. The data might drive the USD demand and provide some impetus to the Gold price. The focus, however, remains clued to the release of the Personal Consumption Expenditure (PCE) Price Index from the United States (US) on Friday. This will play a key role in influencing the Fed’s rate-hike path and provide a fresh directional impetus to the XAU/USD.

Gold price technical outlook

From a technical perspective, some follow-through selling and acceptance below the $1,900 mark will be seen as a fresh trigger for bearish traders. Given that oscillators on the daily chart are holding deep in the negative territory and are still far from being in the oversold zone, Gold price might then accelerate the fall towards the $1,876-$1,875 area. The downward trajectory could get extended further towards challenging the very important 200-day Simple Moving Average (SMA), currently pegged around the $1,840 region.

On the flip side, any positive move beyond the $1,912-$1,913 zone, or the Asian session peak, might now confront resistance near the $1,924-$1,925 region ahead of the $1,936 area. This is closely followed by the 100-day SMA, currently around the $1,942 zone. A sustaiend strenght above might trigger a short-covering rally towards the $1,962-$1,964 hurdle en route to the $1,970-$1,972 supply zone. Some follow-through buying should allow Gold price to reclaim the $2,000 psychological mark and climb further towards the $2,010-$2,012 hurdle.