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Gold Price Forecast: XAUUSD establishes below $1,890 ahead of US Core PCE and GDP

Gold Price (XAU/USD) is balancing below $1,890.00 after remaining imbalance from the past few trading sessions. Market participants have strongly offered the precious metal on higher expectations of a jumbo interest rate hike by the Federal Reserve (Fed) in May in the last few trading sessions. The asset is heading south continuously since the last week after failing to sustain above the psychological resistance of $2,000.00.

Soaring inflation in the US economy along with the consistency in achieving full employment is fulfilling the stipulations of an interest rate elevation by the Fed. The US central bank policymakers have already warned that investors should brace for higher inflation going forward. Currently, the US Consumer Price Index (CPI) has been recorded at 8.5% for the month of March, the highest since December 1981 from 7.9% in February, which is hammering the precious metal.

Fed chair Jerome Powell has already spoiled the suspense by stating that an interest rate hike by 50 basis points (bps) is on the cards. Inflation is the major concern for Fed policymakers however, the tight labor market has eased the mess to some extent for the Fed. The agenda of balance sheet reduction was not discussed much but the Fed is expected to turn the wheel to squeeze liquidity from the market at a higher pace, which will bring an intense sell-off in the gold prices.

Also read: Gold Price Forecast: XAUUSD needs to hold $1,877 to maintain upward bias – Credit Suisse

Investors are also betting firmly on the hawkish guidance from the Fed. As per CME Fedwatch tool, Fed is expected to raise rates by half a percentage point at each of its next two meetings. Considering the outcome of the economic indicator and plummet in the gold prices, it would not be wrong to state that market participants are already discounting the whole liquidity constraint environment, which is likely to remain for the remaining year.

Meanwhile, the US dollar index (DXY) has fallen below the round level support of 103.00 but the upside remains favored on hawkish Fed bets. The asset registered a fresh five-year high at 103.28 on Wednesday but profit-booking dragged the DXY marginally below 103.00. Going forward, investors are focusing on some potential economic data, which will have a significant impact on the DXY. The US Bureau of Economic Analysis will report the quarterly Core Personal Consumption Expenditure (PCE) on Thursday, which is likely to print at 5.4%, higher than the prior print of 5%. A higher reading may strengthen the DXY further and investors will find the DXY kissing its 19-year high at 103.82.

Apart from the Core PCE, gold prices and the DXY will get impacted by the release of the Gross Domestic Product (GDP) numbers. The annual GDP is seen at 1.1% against the prior print of 6.9% while the quarterly GDP has room for an upside surprise. A preliminary reading for the quarterly GDP is 7.3% in comparison with the previous figure of 7.1%.

Gold technical analysis
On a four-hour scale, XAU/USD is facing barricades near the supply zone placed in a narrow range of $1,890.21-1,895.15. The 20- and 50-period Exponential Moving Averages (EMAs) at $1,905.31 and $1,925.57 respectively are heading south, which adds to the downside filters. Meanwhile, the Relative Strength Index (RSI) (14) is oscillating in a bearish range of 20.00-40.00, which signals more pain ahead.

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