Gold Price Forecast: XAU/USD retreats from weekly highs, back below $1890 on risk aversion

• Gold extends its losses below solid resistance around $1890.
• The Federal Reserve and the BoE expressed concerns about China’s covid crisis.
• Gold Price Forecast (XAU/USD): Retreated below $1890, opening the door for further losses.

Gold spot (XAU/USD) is recording losses in the North American session, retreating from daily highs around $1909.66, amidst a risk-off market sentiment, as two-central banks expressed worries about China, while the Bank of England (BoE) foresees a GDP contraction on 2023 for the UK. At $1878.51 a troy ounce, XAU/USD is down 0.14% but below March’s 2022 lows at $1890.

On Wednesday, the Federal Reserve hiked rates by 50-bps, lifting the Federal Funds Rates by 1%. The market’s initial reaction was a “buy the rumor, sell the fact” event, partly because massive greenback longs positions took profits. In the same monetary policy decision, the US central bank announced that it would reduce its $8.9 trillion balance sheet on June 1 by $47.5 billion, $30 billion of US Treasuries, and $17.5 billion of mortgage-backed securities (MBS).

In his press conference, Fed’s Chief Jerome Powell pushed back against 75-bps hikes but would not rule 50-bps increases in a couple of meetings.

Across the pond, the Bank of England (BoE) hiked rates by 25-bps, though the vote was split 6-3. In its opening statement, the BoE Governor Andrew Bailey said that inflationary pressures intensified since the Ukraine-Russia war and added that inflation is well above the target. He said that risks for UK’s growth are skewed to the downside, and it is expected to slow sharply.

The Fed and the BoE worried about China’s Covid crisis

The US and the UK central banks portrayed some warnings about the ongoing Covid-19 crisis in China. The Fed mentioned that “In addition, COVID-related lockdowns in China are likely to exacerbate supply chain disruptions,” while the Bank of England said that it was “worried” about renewed Covid-19 lockdowns and added that threatens to hit supply chains again and add to inflation pressures.

Aside from this, the US economic docket featured Initial Jobless Claims for the week ending on April 29, which increased to 200K from 182K foreseen by analysts. The report notes that labor costs surged to 11.6%, showing the tightness of the job market.

Gold Price Forecast (XAU/USD): Technical outlook

Gold remains neutral-downward biased, retracing the previous jump to weekly highs around $1909.66 one day after the Fed’s decision. As of writing, XAU/USD price is below the 50 and the 100-day moving averages (DMAs), a sign of the yellow-metal weakness. Also, on its way north lies a solid resistance area around March’s lows, previous support-turned-resistance at $1890, which in the event of XAU/USD prices shooting higher, would be difficult to overcome on its way north.

Upwards, XAU/USD traders would face solid resistance at the 100-DMA at $1882.31, followed by March’s lows at $1890 and the $1900 mark. On the other hand, XAU/USD’s first support would be May 3 daily low at $1850.34, closely followed by the 200-DMA at $1835.41, and then January’s 28 YTD low $1780.18.