Gold forecast: XAU/USD turns lower as macro headwinds build

Gold has now rolled over intraday after its earlier rebound, reinforcing the broader bearish technical setup. The move comes as the same macro forces that were supporting risk appetite earlier – namely, resilient Chinese trade data and easing oil prices – were not enough to keep stocks supported once US investors came to the fray. With risk assets dropping, combine with a still-supportive US dollar environment, our gold forecast continues to remain modestly bearish ahead of US CPI release on Wednesday.

Why has gold turned lower?

Stronger global risk sentiment tends to reduce demand for defensive positioning in gold, but in recent years the opposite has been the case with the metal correlating positive with stocks. Now with the S&P 500 wiping out its earlier gains, this has also pressured gold. The metal was already under pressure amid the relatively elevated bond yields, and a recovering US dollar.

Unless we see a meaningful deterioration in US data or a sharp reversal in the dollar and yields, the fundamental backdrop does not currently offer strong support for the near-term gold forecast. Instead, conditions remain consistent with a grinding corrective phase.

Technical gold forecast and key levels to watch

Technically, the break below the previously defended support zone around the $4,350-$4,400 area had already left the market vulnerable. That area had repeatedly generated demand, but its failure last week shifted the structure decisively in favour of sellers.

The focus now turns to downside continuation, with $4,200 potentially as the next key level of interest. A sustained break below that would expose the next major area around $4,000, where liquidity is likely to be more significant and where markets could attempt a recovery.

Source: TradingView.com

The broader trend on XAUUSD chart remains weak, with gold now on track for a fourth consecutive monthly decline and having lost is 200-day average support. Momentum is clearly aligned to the downside, and rallies are increasingly being sold rather than bought – as we saw again today.

That said, if gold were to stage a surprise rally in the coming days and move back above $4400, and ideally $4481 – Friday’s high – then this will completely invalidate the bearish technical view. For now, however, the burden of proof remains firmly with the bulls.

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R

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