Gold Price Forecast: XAU/USD Bulls are in charge despite hawkish Fed

Support is located in and above the $1,930s with 'blue skies' in the $2,000s eyed.

Will XAU/USD continue to ignore rising US yields？

The gold price is down a touch by some 0.11% and is trading in a tight range slightly above and below $1,950 in Asia on Tuesday in a risk-off setting. The mood is a little sombre following a weak start on Wall Street as investors focus on inflation and the impact of central bank policy tightening.

- All major groups in the S&P 500 fell, while the tech-heavy Nasdaq 100 fell more than 2%. Ten-year Treasury yields surpassed 2.75% for the first time since March 2019. Traders in the money markets are pricing in a hot inflation number for data in the US this week as the Federal Reserve signalled sharp rate hikes and balance-sheet reductions to combat price pressures last week. Additionally, adding to the sour mood, China's largest coronavirus outbreak in two years has raised economic concerns.

Shanghai COVID new cases: 23,342

There were 26,087 new daily infections reported in the Chinese financial hub Sunday, an all-time high while April 11 reports a similar load of 23,342. Bloomberg reported earlier that ''economists now predict the economy will expand 5% this year, below the official target of around 5.5%. Analysts at Morgan Stanley have cut their growth forecasts this year on the lockdown impact, while Citigroup Inc. has warned of risks to growth in the current quarter.''

As for the Fed, in speakers this week so far, Charles Evans, president of the Federal Reserve Bank of Chicago and a long-time dovish policymaker in the United States, said an accelerated pace of rate hikes to combat inflation is worth debating. Nevertheless, gold has continued to churn higher despite a decisively hawkish Fed.

''All the shorts have been wiped out and ETF inflows have slowed as the fear trade subsides,'' analysts at TD Securities said.

Economic events will be critical this week and the US Consumer Price Index will be the first major economic data to help unveil the health of the global economy. With strong prices for March reinforcing the hawkish outlook at the Fed, this would be potentially supportive of the US dollar and weight for the price of gold. On the other hand, analysts at Rabobank have warned that the Fed could be hiking into recession.

Gold technical analysis

The gold price has been range-trading since mid-March, potentially accumulating the 2022 rally and ripening for a bullish continuation.

From a 4-hour perspective, the bullish structure is being carved out and a break beyond $1,970 could be on the cards for the sessions ahead. However, should a strong US dollar prevail, $1,930 could come under pressure and if that were to give out, the near term prospects of a move higher will be severely diminished in the absence of a risk-off shock in the markets, such as a sudden Ukraine crisis escalation: Ukraine pres. Zelenskyy: Russian forces could use chemical weapons.