Gold Price Forecast: XAU/USD sellers regain control, eye a sustained move below $2,300
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UPGRADE- Gold price kicks off the week on a bearish note amid a cautious mood and mixed Chinese data.
- The US Dollar consolidates the previous week’s gains, as the US Treasury bond yields rebound underpins.
- Gold price once again aims for $2,300 and $2,277, with a Bear Cross and a bearish RSI in play.
Gold price is reversing a part of Friday’s upswing, having faced rejection once again above the $2,330 level early Monday. Gold price fails to benefit from a pause in the US Dollar (USD) upsurge, as the US Treasury bond yields recover after last week’s downward spiral.
Gold price awaits Fedspeak for more policy cues
The US Treasury bond yields bore the brunt of strong US government bond auctions and a dovish Federal Reserve (Fed) outlook in the previous week. The sell-off in the US Treasury bond yields, however, Gold price logged a weekly loss, as the US Dollar stood tall amid risk aversion.
On Friday, Gold price staged a rebound, courtesy of the continued decline in the US yields and mounting political uncertainty in the Euro area, as France is heading closer to the snap elections due on June 30. Gold traders overlooked the increase in the University of Michigan Inflation Expectations data for June amid mixed messages from the Fed policymakers.
Cleveland Fed President Loretta Mester said Friday that she would like to see a longer run of good-looking inflation data, and noted that the path towards the Fed's 2.0% inflation goal may take longer than expected. Meanwhile, Chicago Fed President Austan Goolsbee noted that “if we keep making progress on inflation, and the rates can come down, we may avoid recession.” He added that “as European countries cut rates, that could push up the dollar.”
Over the weekend, Minneapolis Federal Reserve President Neel Kashkari said the Fed will wait until December to cut interest rates, adding that the central bank is in a very good position to get more data before making any decisions.
Hawkish comments from Fed policymaker Kashkari combined with unimpressive Chinese economic data contributes to the renewed downside in Gold price. China’s House Price Index declined 3.9% in May while Industrial Production fell more than expected. China’s Retail Sales rose 3.7% YoY in the same period, compared to a 3.0% increase expected.
Later in the day, traders will keep an eye on the Euro area political developments, which could have a significant impact on risk sentiment and the US Dollar price action, eventually influencing the USD-denominated Gold price moves. Speeches by Fed officials will be also closely scrutinized to gauge the timing of te interest rate cut.
Markets are currently pricing in about 62% odds of a rate cut by the Fed in September while that for December is seen at 27%.
Gold price technical analysis: Daily chart
The short-term technical outlook for Gold price remains in favor of sellers, as it continues to remain confined in a range, with the upside capped by the confluence of the 21-day Simple Moving Average (SMA) and the 50-day SMA near $2,345. On the other hand, the downside appears guarded by the May 3 low of $2,277.
The 14-day Relative Strength Index (RSI) manages to hold below the 50 level, currently near 48.00.
Further, the 21-day SMA crossed the 50-day SMA from above on a daily closing basis on Friday, confirming a Bear Cross.
These technical indicators signal that more declines remain in the offing for Gold price.
The immediate support is now seen at the $2,300 threshold, below which the June 10 low of $2,287 will come into play,
A sustained break below the latter will retest the May 3 low of $2,277, as sellers aim for the $2,250 psychological barrier.
Alternatively, any rebound in Gold price will need acceptance above key confluence support-turned-resistance near $2,345, where the 21-day and 50-day SMAs hang around.
Gold buyers will then flex their muscles toward the May 24 high of $2,364 on their way to the June 7 high of $2,388.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
- Gold price kicks off the week on a bearish note amid a cautious mood and mixed Chinese data.
- The US Dollar consolidates the previous week’s gains, as the US Treasury bond yields rebound underpins.
- Gold price once again aims for $2,300 and $2,277, with a Bear Cross and a bearish RSI in play.
Gold price is reversing a part of Friday’s upswing, having faced rejection once again above the $2,330 level early Monday. Gold price fails to benefit from a pause in the US Dollar (USD) upsurge, as the US Treasury bond yields recover after last week’s downward spiral.
Gold price awaits Fedspeak for more policy cues
The US Treasury bond yields bore the brunt of strong US government bond auctions and a dovish Federal Reserve (Fed) outlook in the previous week. The sell-off in the US Treasury bond yields, however, Gold price logged a weekly loss, as the US Dollar stood tall amid risk aversion.
On Friday, Gold price staged a rebound, courtesy of the continued decline in the US yields and mounting political uncertainty in the Euro area, as France is heading closer to the snap elections due on June 30. Gold traders overlooked the increase in the University of Michigan Inflation Expectations data for June amid mixed messages from the Fed policymakers.
Cleveland Fed President Loretta Mester said Friday that she would like to see a longer run of good-looking inflation data, and noted that the path towards the Fed's 2.0% inflation goal may take longer than expected. Meanwhile, Chicago Fed President Austan Goolsbee noted that “if we keep making progress on inflation, and the rates can come down, we may avoid recession.” He added that “as European countries cut rates, that could push up the dollar.”
Over the weekend, Minneapolis Federal Reserve President Neel Kashkari said the Fed will wait until December to cut interest rates, adding that the central bank is in a very good position to get more data before making any decisions.
Hawkish comments from Fed policymaker Kashkari combined with unimpressive Chinese economic data contributes to the renewed downside in Gold price. China’s House Price Index declined 3.9% in May while Industrial Production fell more than expected. China’s Retail Sales rose 3.7% YoY in the same period, compared to a 3.0% increase expected.
Later in the day, traders will keep an eye on the Euro area political developments, which could have a significant impact on risk sentiment and the US Dollar price action, eventually influencing the USD-denominated Gold price moves. Speeches by Fed officials will be also closely scrutinized to gauge the timing of te interest rate cut.
Markets are currently pricing in about 62% odds of a rate cut by the Fed in September while that for December is seen at 27%.
Gold price technical analysis: Daily chart
The short-term technical outlook for Gold price remains in favor of sellers, as it continues to remain confined in a range, with the upside capped by the confluence of the 21-day Simple Moving Average (SMA) and the 50-day SMA near $2,345. On the other hand, the downside appears guarded by the May 3 low of $2,277.
The 14-day Relative Strength Index (RSI) manages to hold below the 50 level, currently near 48.00.
Further, the 21-day SMA crossed the 50-day SMA from above on a daily closing basis on Friday, confirming a Bear Cross.
These technical indicators signal that more declines remain in the offing for Gold price.
The immediate support is now seen at the $2,300 threshold, below which the June 10 low of $2,287 will come into play,
A sustained break below the latter will retest the May 3 low of $2,277, as sellers aim for the $2,250 psychological barrier.
Alternatively, any rebound in Gold price will need acceptance above key confluence support-turned-resistance near $2,345, where the 21-day and 50-day SMAs hang around.
Gold buyers will then flex their muscles toward the May 24 high of $2,364 on their way to the June 7 high of $2,388.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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