- Gold Price holds above the 200-day SMA but looks to post weekly losses.
- FOMC Chairman Powell will testify before Senate next week.
- XAUUSD should continue to react to US T-bond yields in the near term.
Gold Price seems to have gone into a consolidation phase near $1,850 after having gained more than 2% in the previous two days. Markets remain relatively quiet ahead of the three-day weekend in the US and XAUUSD remains on track to post weekly losses despite the impressive rally witnessed following the Federal Reserve's policy announcements.
Key support stays intact
Although the near-term technical outlook fails to provide a clear directional clue, sellers could remain on the sidelines as long as gold manages to hold above the 200-day SMA, which is currently located at $1,840. FOMC Chairman Jerome Powell's comments during his two-day testimony before the US Senate next week will be the next significant catalyst.
Gold Price at the mercy of US yields
US Treasury bond yields fell sharply in the second half of the week and allowed gold to gain traction. With the initial reaction to the FOMC's decision to hike the policy rate by 75 basis points, the benchmark 10-year US Treasury bond yield climbed above 3.4%. During the press conference, however, Powell refrained from committing to another 75 bps hike in July and caused yields to fall sharply. The Swiss National Bank's unexpected rate hike on Thursday and the Bank of England's 25 bps rate increase, caused the market focus to shift to European bonds and the 10-year US yield extended its slide before settling near 3.2% on Friday.
The US Dollar Index reached its highest level in more than two decades at 105.78 on Wednesday but erased a large portion of its weekly gains. The greenback failed to gather strength despite the risk-averse market environment as the Swiss franc and the Japanese yen became the go-to safe-haven assets. The renewed dollar weakness helped XAUUSD preserve its bullish momentum on Thursday.
Fed Chairman Powell will deliver his semi-annual monetary policy testimony before the Senate Banking Committee on Wednesday. After presenting his opening statement, Powell will respond to questions. According to the CME Group FedWatch Tool, markets are currently pricing in an 88.5% probability of a 75 bps rate hike in July. The market positioning suggests that there is room for US yields to fall if Powell revives expectations for a 50 bps hike at the next meeting. On the other hand, another decisive rally in US yields could be hard to come by even if Powell confirms a 75 bps hike.
FOMC Chairman Jerome Powell testifying before Senate
XAUUSD price could also be impacted by next week's PMI reports. Investors grow increasingly concerned over a global recession as major central banks look to continue to tighten their policies. If PMI data from the euro area and Germany point to a loss of growth momentum in the private sector, market participants could see that as a reminder of the widening policy gap between the European Central Bank (ECB) and the Fed. In that scenario, XAUUSD could come under renewed bearish pressure.
Gold Price technical outlook
Gold Price lost its bullish momentum on Friday. The Fibonacci 23.6% retracement level of the latest downtrend and the 20-day SMA form the first resistance at $1,850. In case gold starts using that level as support, it could target $1,875 (50-day SMA, Fibonacci 38.2% retracement) and $1,890 (100-day SMA).
On the downside, a daily close below $1,840 (200-day SMA) could be seen as a bearish development and bring in sellers. In that scenario, interim support aligns at $1,830 (static level) ahead of $1,810 (static level) and $1,800 (psychological level).
In the meantime, the Relative Strength Index (RSI) on the daily chart stays slightly below 50, reflecting gold's indecisiveness in the short term. Similarly, the Average Directional Index (ADX) indicator is now at its weakest level since early February at 12.
Gold Price Report: What's next for commodity prices?
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.