Gold Price Forecast: The dollar set to win the battle

XAUUSD Current price: $1,849.65

• The European Central Bank anticipated a 25 bps rate hike in July.
• Concerns about soaring inflation sent government bond yields up and stocks nosediving.
• XAUUSD trades in familiar levels with increased chances of a bearish breakout.

Spot gold trades around $1,850 a troy ounce, marginally lower on Thursday, as the market mood turned firmly sour following the European Central Bank monetary policy decision.  As widely anticipated, the central bank left rates unchanged and announced a rate hike coming in July, followed by another one in September. However, the hike will be 25 bps and not 50 bps as widely anticipated. Higher rates are possible, according to ECB’s President Christine Lagarde, but overall, her words suggest the central bank will be utterly cautious when it comes to pulling the trigger.

The shared currency initially rallied with the news, helping to keep XAUUSD afloat. However, inflation-related concerns included in the ECB’s statement weighed on the market’s mood. Stocks plunged while government bond yields soared. It is worth noting that, on Wednesday, a White House spokeswoman said that the government expects US inflation to come higher than anticipated. The Consumer Price Index will be out on Friday, and according to analysts, it will rise by 8.3% YoY.  Meanwhile, the yield on the 10-year Treasury note hit an intraday high of 3.073%.

Gold Price short-term technical outlook

XAUUSD is little changed for a second consecutive day, holding above the $1,840 price zone. The daily chart shows that the bright metal is holding above the 20 and 200 SMAs, both around $1,842.00 and providing dynamic support. Technical indicators have eased within positive levels and head modestly lower within neutral levels, anyway skewing the risk to the downside.

The 4-hour chart shows that gold is currently battling with converging 20 and 100 SMAs, while the 200 SMA maintains its bearish slope well above the current level. The Momentum indicator turned lower around the 100 level, while the RSI indicator hovers around 48. Bulls may gain control if the metal advances past $1,864.00, an unlikely scenario for the upcoming sessions.

Support levels: 1,842.00 1,828.45 1,813.90

Resistance levels: 1,852.90 1,864.00 1,877.10  

View Live Chart for the XAU/USD