Gold Price Forecast: XAU/USD drops sharply post failing to reclaim $1,950 as hawkish Fed bets rebound
|- Gold price has dropped firmly after failing to tap the $1,950.00 resistance amid a recovery in hawkish Fed bets.
- S&P500 futures have recovered some of their losses added in Asia, however, the overall market mood is still cautious.
- US Yellen believes that inflation can be arrested while maintaining an upbeat labor market.
Gold price (XAU/USD) has witnessed a steep fall after failing to kiss the crucial resistance of $1,950.00 in the European session. The precious metal has attracted significant offers as the corrective move in the US Dollar Index (DXY) seems concluded due to an improvement in odds for the continuation of the rate-hiking spell by the Federal Reserve (Fed).
S&P500 futures have recovered some of their losses added in Asia, however, the overall market mood is still cautious as investors are worried that more interest rate hikes by the Fed would worsen the economic outlook.
US Treasury Secretary Janet Yellen stated on Wednesday that robust consumer spending has kept the United States economy resilient. She feels that inflation can be arrested while maintaining an upbeat labor market, with unemployment in the 4% range, up slightly from the 3.7% reading in May, as reported by Reuters.
The odds for one more interest rate hike from the Fed rebounded after former Richmond Fed President Jeffrey Lacker cited current interest rates at 5.0-5.25% should rise to 6% in order to bring down sticky inflation.
The USD Index is expected to remain choppy as the economic calendar has nothing much to offer this week. Economists at MUFG believe that consolidation at these stronger US Dollar levels seems most likely given the probable declining appetite for position-taking ahead of a key week next week with the US Consumer Price Index (CPI) data and the FOMC and European Central Bank (ECB) meetings.
Gold technical analysis
Gold price has formed a textbook-traced Darvas Box chart pattern on a four-hour scale, which indicates a volatility contraction, followed by a one-way move. The precious metal is consolidating in a range of $1,932-1,985 for the past three weeks. Broadly, horizontal support is plotted from March 15 high at $1,937.39.
The magical 200-period Exponential Moving Average (EMA) at $1,975.47 is acting as a strong barrier for the Gold bulls.
The Relative Strength Index (RSI) (14) is hovering near 40.00 and a break below the same will trigger the bearish momentum.
Gold four-hour chart
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