Gold Price Forecast: XAU/USD falls to a new yearly low near $1,800

• The price of gold is again under pressure in a context of reactivation of demand for the dollar.
• Dovish expectations around the Fed and high US bond yields benefit the dollar.
• Recession fears support the safe-haven XAU/USD and help limit losses.

The price of gold (XAU/USD) fails to take advantage of the previous day’s modest rebound from the $1,807-$1,806 zone, or its yearly low, and runs into fresh selling on Tuesday. XAU/USD remains under pressure during the European session and is currently sitting at $1,807, down -0.50% on the day, recovering slightly from a fall near $1,805, its lowest level since December 29, 2022.

Following a modest pullback from a seven-week high hit on Monday, the US dollar (USD) is back in demand amid expectations of further monetary policy tightening by the Federal Reserve (Fed). This, in turn, is seen as a key factor putting some downward pressure on the price of gold, denominated in US dollars. Markets now seem convinced that the Fed will maintain its hawkish stance in the face of stubbornly high inflation.

These expectations were reinforced by the US Personal Consumption Expenditure (PCE) Price Index, which indicated that inflation is not coming down as fast as expected. In addition, several Fed officials insisted on the need to raise interest rates to reduce inflation. This remains supportive of high US Treasury yields and further steers money flows away from gold, which does not offer yields.

Investors, for their part, continue to concerned about economic difficulties arising from the rapidly increasing costs of borrowing. This, along with geopolitical tensionskeeps stock market optimism at bay and lends some support to safe-haven gold. This, in turn, warrants caution before opening further bearish positions around XAU/USD and positioning for a further depreciation move.

However, the prospect of further monetary tightening by the Fed should continue to support the greenback and favor XAU/USD bears. The price of gold seems set to weaken further below the $1,800 level and test the support of the 100-day SMA, currently around the $1,792 area. This should act as a turning point, which if broken decisively will set the stage for deeper losses.

Gold technical levels to watch