Gold Price Forecast: XAU/USD tumble amidst strong USD, Fed’s Powell testimony looms

• XAU/USD trades at $1932.42 after a sharp fall due to a stronger USD, with traders watching for Fed Chair Powell’s testimony.
• Despite Fed officials’ predictions of a 50 bps increase to FFR, market participants anticipate only a 25 bps hike.
• Depending on his tone, Fed Chair Powell’s testimony could impact USD and Gold prices.

Gold price tumbled sharply in the North American session as trading resumed after a holiday in the United States (US). A stronger US Dollar (USD) is the main reason behind XAU/USD’s fall, as the US Treasury bond yield slid, with traders eyeing Federal Reserve (Fed) Chair Jerome Powell’s testimony at the US Congress. At the time of writing, XAU/USD is trading at $1932.42 after hitting a daily high of $1956.74.

Expectations for a rate hike put pressure on XAU/USD prices, with markets keenly awaiting Powell’s upcoming Congress appearance

US equities continue to trade negatively. The US 10-year benchmark note dropped more than ten basis points at 3.707%, a tailwind for Gold prices, which remained downward pressured. Even though the CME FedWatch Tool shows, traders expect a 25 bps increase at the July Federal Reserve Open Market Committee (FOMC) meeting. It should be said that despite Federal Reserve officials forecasting 50 bps increases to the Federal Funds Rate (FFR), market participants are not, as shown by CME data.

In the meantime, US State Secretary Anthony Blinken reunited with Chinese President Xi Jinping to improve ties between but countries. Still, they failed to get an agreement on better military communication. Expectations for growth in China have been revised downward as the People’s Bank of China (PboC) has cut rates three times in the last ten days, aiming to stimulate the economy.

Aside from this, Fed Chair Jerome Powell will appear at the US Congress on Wednesday and Thursday. Traders expect the Chair to keep his press conference tone, but any hawkish surprises can bolster the US Dollar, and weaken Gold, as it would underpin US Treasury bond yields higher. However, any dovish signals and the greenback would be punished by market participants.

On the data front, US housing starts soaring to a 13-month high, up 21.7% MoM in May, crushing April’s -2.9% contraction, while Building Permits rose by 5.2%, exceeding last month’s -1.4% plunge.

Upcoming events

The US economic docket would be busy with Fed officials crossing the wires, led by Fed Chair Powell. Initial Jobless Claims and Existing Home Sales will be featured on Thursday.

XAU/USD Price Analysis: Technical outlook

XAU/USD resumed its downward path after breaking a descending symmetrical triangle, breaking dynamic support at the 100-day Exponential Moving Average (EMA) at $1939.56. Immediate support lies at $1925.06, June 15 swing low, ahead of nosediving toward $1900. Of note, oscillators warrant further downside, as the Relative Strength Index (RSI) indicator portrays sellers in charge, while the three-day Rate of Change (RoC) shifted gears to the downside after back-to-back positive sessions. Conversely, if XAU/USD reclaims $1950, that could cap XAU/USD’s losses, but a break above the 20-day EMA, at  $1957.13, could offer additional support to the yellow metal.