Gold Price Forecast: XAU/USD bears rally and threaten to break the 50 DMA, aiming to reach $1,830

• The price of gold extended its losses in the session, with a decrease of 0.22%.
• The University of Michigan Consumer Sentiment improved, while inflation expectations rose for 2023.
• Gold Price Preview: A daily close below the 50 EMA could expose Gold to further selling pressure.

The price of gold is holding firm around $1,860 after hitting a fresh weekly low of $1,852.45 on Friday on speculation the US Federal Reserve would hike rates by 25 basis points in the next couple of meetings, as the money market futures showed. Gold’s advance was capped by a bid in the USD and Treasury yields hitting 5-week highs. At the time of writing, the XAU/USD pair was trading at $1858.68, up 0.20% from its opening price.

XAU/USD rallied to its daily highs on US consumer sentiment

Wall Street remains mixed, with the Nasdaq 100 an outlier, shedding more than 0.50%. A University of Michigan (UM) survey reported that US consumer sentiment topped estimates of 65 and rose to 66.4, showing improving economic conditions. For their part, inflation expectations for a one-year horizon increased by 4.2% from the 3.9% reported in the final reading for January, while for a 5-year horizon they remained unchanged at 2.9%. The XAU/USD pair reacted to the data, reaching a high of $1,866.80, although it pulled back towards current prices.

Aggressively, Fed Officials’ Comments Hurt XAU

On the other hand, several Federal Reserve (Fed) officials declared during the week that more rate hikes are coming in the fight of the US central bank to curb inflation. New York Fed President John Williams commented on raising the Federal Funds Rate (FFR) to 5%-5.25%. At the same time, Minnesota Fed President Neil Kashkari, a 2023 FOMC voter, stated that the FFR should go up to 5.4%.

Echoing some of his comments was Lisa D. Cook, who said it is appropriate to move in “smaller steps” as the Fed assesses the effects of cumulative tightening. Later, Richmond Fed President Thomas Barkin said the Fed is “unequivocally” putting the brakes on the economy.

Gold Weakens on Rise in Treasury and US Dollar Yields

Meanwhile, US Treasury yields continued to support the dollar. The 10-year yield is up six basis points to around weekly highs of 3.728%, a headwind for XAU prices. The Dollar Index (DXY), which tracks the value of the dollar against a basket of pairs, is up 0.37% on the day to 103.57.

Gold Technical Analysis

The daily chart for XAU/USD shows the yellow metal with a neutral bias to the downside, although consolidation around $1,860 and a subsequent break could pave the way for further losses. However, the 50 day EMA at $1,856.50 could limit the fall in Gold. Next support is found at the Dec 27 high turned support at $1,833.29, followed by the 100-day EMA at $1,816.91.