XAUUSD could extend its sharp retracement from the $2,000 mark that capped the ascent earlier this month

Gold prices fell to more than two-month lows earlier on Thursday before bouncing marginally in recent trading. The XAUUSD pair dipped to $1,872 for the first time since mid-February as dollar’s strength continues to push the non-yielding metal lower. Early in Europe, the USD index came off five-year highs seen around 103.70 to trim intraday gains. As a result, the bullion turned slightly positive on the day, bouncing back above the ascending 100-DMA that was derailed for the first time since early-March.

The precious metal looks vulnerable to even deeper losses in the near term as the buck is about to register fresh long-term highs after a short-lived pause. Traders continue to buy the USD in anticipation of the upcoming Federal Reserve meeting due next week, with expectations looking bold after hawkish comments from the central bank’s officials including Powell. The regulator is expected to hike interest rates by 50 bps when it meets on Wednesday, and ultimately lift rates to around 3.0% by the end of 2022. 

Also, the greenback derives support from rallying US Treasury yields amid growing inflation fears, which in turn pressures gold. As such, XAUUSD could extend its sharp retracement from the $2,000 mark that capped the ascent earlier this month. Should the prices fail to hold above the mentioned lows, the $1,850 zone will come into the market focus next. 

In a wider picture, however, the yellow metal could regain the upside momentum as escalating geopolitical risks are extended to underpin investment demand for gold. In the coming months, signs of slowing US GDP growth could have a negative impact on the dollar’s appeal, suggesting the bullion will have a good chance for reversal that may eventually push he prices back above $2,000.


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