Gold Price Forecast: XAU/USD drops below $1,800 on USD strength, despite falling US bond yields

• Gold price slides below $1,800 after hawkish commentary by Fed Chair Jerome Powell.
• The US Dollar remains bid, a headwind for the precious metals space.
• US Retail Sales disappointed, portraying the effects of “cumulative tightening” by the Fed.

Gold price extended its losses following a more “hawkish” than expected Federal Reserve’s (Fed) decision on Wednesday. Even though the 50 bps rate hike by the Federal Reserve, the subsequent language used by its Chairman Jerome Powell further cemented the case for a higher “terminal” rate. At the time of writing, the XAU/USD is trading at $1,782 a troy ounce.

Wall Street is trading with losses after the Fed’s decision. Jerome Powell and Co.’s decision to hike rates but also revise its September projections, lifting the dot plots above the 5% threshold, caught traders off guard, which were expecting a Fed pivot after “just” two months of lower inflation. At his press conference, Jerome Powell said the labor market remains out of balance and that“we have more work to do.” He emphasized that the Fed needs “substantially more evidence of lower inflation” and that the Fed isn’t at a sufficiently restrictive stance yet and still has “some ways to go.”

In the meantime, the US Dollar Index (DXY), a gauge of the buck’s value against a basket of peers, remains positive but trading off the day’s highs of 104.406, weighed by the European Central Bank (ECB) press conference of its President Christine Lagarde. At the time of typing, the DXY is trading at 103.870, gaining 0.26%. Hence, as the US Dollar remained bid, Gold dropped from its multi-month highs of $1,824.47, plunging 1.22% on Thursday.

Elsewhere, the economic docket in the United States (US) featured November Retail Sales, which missed expectations, plummeting 0.6% MoM vs. estimates of 0.1% contraction. Meanwhile, Initial Jobless Claims rose by 211K, less than estimates of 230K, displaying the tightness of the labor market, which was acknowledged by Fed Chair Powell during its Q&A press conference Wednesday.

Additionally, the Philadelphia Fed Business Index and the New York Fed Manufacturing Index missed forecasts by far, with the former sliding -13.8 vs. 10.0 expected, while the latter dropped -11.2 vs. -1.0 contraction.

Of late, Industrial Production (IP) in the US contracts by 0.2% vs. an increase of 0.1%. November’s figures followed the previous month’s 0.1% contraction, while the Capacity Utilization rate eased from October’s 79.9% to 79.7% in November.

Aside from this, XAU/USD has failed to gain traction, even though the EUR/USD is closing to the 1.0700 mark, which would usually be helpful for Gold prices. Though traders taking profits after a volatile trading session appears to be the reason behind the yellow metal fall.

Gold Price Analysis: Technical outlook

XAU/USD remains neutral to upward biased, though it’s testing the 20-day Exponential Moving Average (EMA) at $1,772.50. Oscillators like the Relative Strength Index (RSI) and the Rate of Change (RoC) suggests sellers are gathering momentum. So, in the near term, XAU/USD might test the 20-day EMA, and once cleared, it could pave the way toward the 200-day EMA at $1,762.07.