Gold Price Forecast: XAU/USD struggles near one-month low, around $1,770 region
- The Fed's hawkish outlook prompted fresh selling around gold on Thursday.
- A stronger USD offset Omicron fears and further weighed on the commodity.
- The technical set-up supports prospects for a slide to November swing low.
Gold came under some renewed selling pressure on Thursday and dropped to a near one-month low, around the $1,768 region during the early part of the European session. Growing conviction that the Fed would tighten its monetary policy sooner rather than later to contain stubbornly high inflation drove flows away from the non-yielding yellow metal. In fact, the money markets indicated that the Fed could begin liftoff in June and hike rates thrice in 2022.The bets increased further after Fed Chair Jerome Powell said the central bank needs to be ready to respond to the possibility that inflation may not recede in the second half of 2022.
In his congressional testimony, Fed Chair Jerome Powell said the US central bank would consider a faster tapering of its bond purchases at the upcoming two-day meeting starting on December 14. The more hawkish shift from Powell acted as a tailwind for the US dollar, which was seen as another factor that weighed on the dollar-denominated gold. Apart from this, a solid rebound in the US equity futures further undermined the safe-haven XAU/USD. This, to a larger extent, offset concerns about that economic fallout from the spread of the Omicron variant of the coronavirus and did little to lend any support to the commodity.
The market concerns exacerbated further after US officials said the new, more transmissible and possible vaccine-resistant vairant had been found in the country. The market mood, however, remained supported by the overnigth comments from the World Health Organization (WHO) official, saying that some of the early indications is that most Omicron cases are mild. The official further added that there is no need to develop a new vaccine and makers should only do minor adjustments to the current vaccines. The fundamental backdrop seems tilted firmly in favour of bearish traders and support prospects for further losses.
Even from a technical perspective, the overnight attempted recovery met with a fresh supply and faltered near a technically significant, 200-day SMA. This comes on the back of the recent break through a one-week-old trading range support and adds credence to the negative outlook. Hence, a subsequent slide towards testing the November monthly swing low, around the $1,759 region, remains a distinct possibility. The steady decline could further get extended towards the next relevant support near the $1,750 area.
Market participants now look forward to the US economic docket, featuring the release of Challenger Job Cuts and the usual Weekly Initial Jobless Claims. This, along with speeches by influential FOMC members, will influence the USD price dynamics and provide some impetus to the XAU/USD. Traders will further take cues from developments surrounding the coronavirus saga and the broader market risk sentiment to grab some short-term opportunities around gold. The key focus, however, will remain on Friday's release of the US monthly jobs report (NFP).
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