Gold Price Prediction: XAU/USD falls below $1,800 as yields increase. Focus on central banks and Fed-inflicted wounds

Gold price (XAU/USD) stays in the red near $1,800 as the US Dollar recovers from a six-month low despite traders' reevaluation of Federal Reserve (Fed) remarks on Thursday morning. Also likely to have benefitted XAU/USD sellers is the cautious sentiment preceding key central bank announcements.

As anticipated, the Fed raised rates by 50 basis points and changed the dot plot to indicate a terminal rate of 5.1%, up from 4.6% in September's Statement of Economic Projections (SEP). The US central bank also updated inflation projections upward, while growth projections for 2023 and 2024 were reduced. In addition, Fed Chairman Jerome Powell defended his image as a hawk while saying that the ultimate level of interest rates is more significant than their rate of change. The official noted that the Federal Open Market Committee (FOMC) must maintain peak interest rates until policymakers are "very certain" that inflation would decline in a sustainable manner.

Following Fed statements, US markets closed on a downbeat note, while US Treasury bond yields also declined. In spite of this, 10-year US Treasury note rates are testing a two-day downtrend near 3.50 percent, while the two-year counterpart extends its recovery from the monthly low and posts its first daily gain near 4.25 percent in three days.

As a result, the US Dollar Index (DXY) recovers at 103.75, while rebounding off a one-month-old support level and a six-month low.

Gold traders should pay close attention to the numerous central bank announcements, beginning with the Swiss National Bank (SNB), European Central Bank (ECB), and Bank of England (BOE), for clear direction. Amidst hawkish expectations and inverse relationships with the U.S. dollar, the ECB will garner the most attention among them. Consequently, the optimistic results of central bankers may weigh on the Gold price going forward.