Gold Price Forecast: XAU/USD pressures daily lows around $2,340

Valeria Bednarik FXStreet

XAU/USD Current price: $2,340.30

Federal Reserve officials' words cooled hopes for a September interest rate cut.
Treasury yields surged to fresh one-month highs, underpinning US Dollar demand.
XAU/USD gains downward traction and approaches a relevant support level at $2,325.30.

Spot Gold is under selling pressure mid-American session, pressuring an intraday low of $2,334.34 a troy ounce. The US Dollar gathered near-term strength at the beginning of the day, giving up gains during European trading hours. After Wall Street's opening, however, the USD resumed its advance with a more sustainable momentum and trades sharply up across the FX board.

Markets are in a sour mood amid comments from Federal Reserve's (Fed) officials, further cooling down hopes for upcoming interest rate cuts this year amid stubbornly high inflation levels. Among others, Bank of Minneapolis President Neel Kashkari said the monetary policy stance is restrictive, adding policymakers haven't entirely ruled out additional interest-rate increases, speaking at an event in London. "I don't think anybody has totally taken rate increases off the table," Kashkari said. As a result, chances of a no-change in rates in September have increased to roughly 53%, according to the CME FedWatch Tool.

At the same time, easing demand for United States (US) government bonds pushed yields higher, adding to the USD's near-term strength. The 10-year Treasury note offers 4.61%, while the 2-year note yields 4.98%, the highest in a month and close to the critical 5.0% threshold.

Data has been scarce, with investors waiting for the US Personal Consumption Expenditures (PCE) Price Index figures to be released on Friday. The Fed's favorite inflation gauge is expected to show price pressures remained above the central bank's goal in April, following an uptick in the previous three months.

XAU/USD short-term technical outlook

The dismal market mood prevents XAU/USD from falling further despite fresh USD demand. Technical readings in the daily chart show the pair could extend its slide. It is falling below a directionless 20 Simple Moving Average (SMA) while technical indicators gain downward traction and are piercing their midlines, which is not enough to confirm a continued slide. Finally, the 100 and 200 SMAs keep heading north, although far below the current level.

The pair turned bearish in the near term, and according to the 4-hour chart, although a continued decline seems unlikely. XAU/USD trades below all its moving averages, with a flat 20 SMA providing near-term resistance at around 2,347.10. At the same time, technical indicators turned flat after crossing their midlines into negative territory, limiting the downward scope. The pair set a relevant low last week at $2,325.30, the level to break to confirm a stepper decline ahead.

Support levels: 2,334.35 2,325.30 2,307.10

Resistance levels: 2,347.10 2,364.00 2,372.90

Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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