• Gold prices have lost their steam as the DXY has rebounded firmly.
• Investors are pouring funds into the DXY on expectations of a bumper rate hike by the Fed.
• Fed’s interest rate could peak around 4-5% but will sustain steady beyond 2023.

Gold price (XAU/USD) has resumed its downside journey after sensing selling interest at around $1,680.00 in the Asian session. The pullback move in the precious metal is concluding now as the US dollar index (DXY) has rebounded firmly. The DXY has picked bids after slipping below the critical hurdle of 109.50.

Bids and the DXY have shown a magnetic relationship as investors are underpinning the latter ahead of the Federal Reserve (Fed) policy. The Fed is expected to accelerate its interest rates by a third consecutive 75 basis point (bps) hike.  As price pressures are not displaying meaningful exhaustion and have also not displayed signs of making a top, the Fed is forced to tighten the monetary tools further.

Apart from the announcement, investors will also focus on the interest rate guidance. The survey from the Financial Times conducted in partnership with the Initiative on Global Markets at the University of Chicago’s Booth School of Business sees Fed interest rates above 4% beyond 2023. The Fed is unlikely to shift its stance to a ‘neutral’ path before the conclusion of 2023 as price pressures will take sufficient time to return to the restoration level. Also, the interest rates will peak around 4-5%.

Gold technical analysis

On an hourly scale, gold prices are oscillating in an Ascending Triangle whose upward-sloping trendline is placed from the previous week’s low at $1,654.17 while the horizontal resistance is plotted from Friday’s high at $1,680.39.

The asset has surrendered the support of the 20-period Exponential Moving Average (EMA), which is placed at $1,673.43.

Gold hourly chart