Gold Price Forecast: Downside Exposed Ahead Of The Fed

Gold (XAU/USD) could drop to $1,286 (ascending weekly 50-MA) if the Fed revises higher its neutral rate.

The options market is bearish on gold

• The XAU/USD one-month 25 delta risk reversals are being paid at 0.525 XAU puts - level last seen in late December.
• Also, the chart shows a head-and-shoulders breakdown,  meaning the implied volatility premium for XAU puts (sell gold) will likely continue rising in the near future.

Daily chart

• A series of lower highs, as represented by the falling trend line, indicates the bear grip has strengthened.  
• Bearish 5-day MA  (moving average) and 10-day MA crossover suggests short-term bearish setup.

Weekly chart

• Last week's drop confirmed bearish doji continuation.
• 5-week MA and 10-week MA are biased bearish, having witnessed a bearish crossover in late February.
• The last week's candle closed below $1,316.56 (38.2 percent Fibonacci retracement of Dec-Jan rally), opening doors for a sell-off to $1,286 (61.8 percent Fibonacci retracement of Dec-Jan rally).

View

• The metal looks set to test $1,286 and could possibly break lower toward $1,260 if the Fed lifts neutral rates (revises 2019/2020 rate forecasts higher).
• On the higher side, only a close above $1,330 (50-day MA) would abort the bearish view and allow a re-test of $1,340.