The overall bullish potential remains limited both from the fundamental and technical points of view

Gold prices fell back below $1,700 last week and have been pressured since then. The XAUUSD pair extended losses to the $1,661 zone before bouncing marginally on Wednesday. The precious metal remains on the defensive amid a stronger dollar that remains the preferred safe-haven asset amid risk-off sentiment dominating global financial markets.

Equities stay pressured by a hawkish Fed, rising geopolitical tensions, recession threat, and the deepening energy crisis in Europe. Of note, the IMF has cut its global growth forecast for 2023 on Tuesday, citing economic pressures from the developments surrounding Ukraine, high energy and food prices and sharply higher interest rates. The Fund warned that more than a third of the world’s economy could contract next year.

The USD index peaked at 113.60 earlier in the day to turn negative in recent trading amid some profit-taking. Now, market participants shift their focus towards the US CPI report due on Thursday. Should the figures come in higher than expected, the dollar will rally across the market due to rising rate hike bets.

In this scenario, gold prices could face renewed downside pressure to challenge the $1,660 support zone, a break below which would pave the way towards the $1,645 intermediate barrier for USD bulls. Next, the market focus would shift towards April 2020 lows seen around $1,614 in late-September.

The bullion bounced from local lows to settle around $1,670, flirting with the 20-DMA. However, the precious metal is unlikely to make a decisive recovery above this moving average any time soon as the overall bullish potential remains limited both from the fundamental and technical points of view. In other words, the path of least resistance remains to the downside at this stage.  


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