23.03.202618:19 Forex Analysis & Reviews: XAU/USD. Analysis and Forecast

Since the beginning of March, the price of gold has fallen by more than 20%, completely erasing the gains accumulated earlier this year. In the near term, bearish pressure is likely to persist, given the tightening stance of central banks, which negatively affects the precious metal.

As the conflict between the United States and Iran drags on, rising oil prices are increasing expectations that central banks worldwide will return to tightening policies to control inflation. The key message from last week's meetings was prioritizing inflation control over economic growth, implying prolonged high interest rates or further rate hikes.

The Reserve Bank of Australia (RBA) raised its rate last week and projected that inflation will exceed its target through 2027–2028, leaving room for further tightening. The Bank of Canada also signaled readiness to raise rates to curb renewed inflationary pressure despite economic uncertainty.

Bank of Japan Governor Kazuo Ueda left open the possibility of a rate hike in April. The Bank of England confirmed its readiness to act amid inflation risks, supply chain disruptions, and rising energy costs due to the Middle East conflict. Markets are now pricing in 80 basis points of tightening by year-end—equivalent to three 25-basis-point hikes—compared to expectations of rate cuts just a month ago.

The European Central Bank (ECB) highlighted risks of tighter monetary policy and a possible return to rate hikes in the second and third quarters amid surging energy prices.

The U.S. Federal Reserve revised its inflation forecasts upward, forcing investors to sharply reduce expectations of rate cuts. According to the CME Group's FedWatch tool, the probability of rate cuts by the end of the year is now zero.

What does this mean for gold? Rapid changes in rate expectations are reflected in bond markets—direct competitors to gold as safe-haven assets. The sharp rise in global bond yields has made them more attractive, triggering liquidation of positions by large institutions and a drop in gold prices. This diverges from the typical market reaction during uncertainty, when gold usually rises.

From a technical perspective, the recent drop in gold prices found support at the key 200-day simple moving average (SMA). The Relative Strength Index (RSI) on the daily timeframe has entered the oversold zone for the first time since October 2023. While this may suggest a possible short-term rebound, the sharp decline in RSI from levels above 60 within a few days indicates strong selling pressure. At the same time, oversold conditions signal the potential for a correction.

The MACD indicator remains below the signal line in deep negative territory, with an expanding bearish histogram, reinforcing the sustained downward momentum.

To weaken the bearish trend and open the path toward $4840, the price must consolidate above $4500. Otherwise, failure to hold above the key 200-day SMA will maintain the risk of further decline toward the $4000 level.