Gold Price Analysis: Bulls eye a correction, US PMIs will be key

Gold price is meeting support and there is a focus on the upside ahead of key data.
US PMIs are eyed for Friday as a potential catalyst.

Ross J Burland FXStreet

Gold price is down on the day after falling from a high of $1,935 to a low of $1,912.82 with the market getting behind the US Dollar and US yields.

Gold prices fell to the lowest in three months on Thursday as investors fear that US interest rates will rise as the central bank looks to slow the US economy to lower inflation. Fed's Chairman Jerome Powell addressed the Senate Banking Panel and repeated that interest rates are likely to continue on an upward path and that no cuts to rates are coming anytime soon.

The US Dollar, as measured by the DXY index, is currently higher by 0.33% and has travelled between a low of 101.921 and 102.467 so far, The move higher is making gold more expensive for international buyers. Bond yields also moved up which is bearish for gold since it offers no interest. The US 10-year note rallied to a high of 3.808% from a low of 3.711% while the two-year note was last seen paying 4.789%, up 1.42%.

'' While the yellow metal has remained locked in a tight range over the last weeks, the lackluster price action is revealing some implicit weakness as the metal fails to rally despite a slumping USD,'' analysts at TD Securities explained. ''Given our gauge of CTA positioning continues to suggest extremely limited outflows, it is possible that discretionary traders are growing their net short position following the latest FOMC meeting, suggesting traders aren't sceptical about the Fed's hawkish communication.''

The Fed is data-dependent. This makes Friday's data a key event and perhaps we will see a deceleration in the price ahead of the data. Manufacturing will be what will be key as the PMI registered its first decline this year in May, while the services PMI continued to improve, posting its fifth consecutive gain last month.

Gold technical analysis

As per the prior day's analysis, Gold Price Forecast: XAU/USD bears eye a breakout, whereby the wick on the daily chart was noted and was expected to be filled in the coming session as a catalyst for a selling programme into support in and around $1,913, we have seen a low of $1,912.82.

Gold prior analysis

There were prospects of a downside continuation on the weekly chart.

Gold daily charts, prior analysis

it was stated, ''From a daily perspective, we are moving into testing the lows while on the front side of the bearish trend. The wick on the chart could've filled in the coming session and this could be the catalyst for a selling programme into support in and around $1,913.''

Gold update

As illustrated, the weekly and daily chart analysis played out.

Gold price outlook

We might see a reversion at this point, into the M-formation's neckline.

On the other hand, should the bears sink in their teeth, the $1,880s will be vulnerable:

Author

Ross J Burland

FXStreet

Ross J Burland, born in England, UK, is a sportsman at heart. He played Rugby and Judo for his county, Kent and the South East of England Rugby team.

AUD/USD reclaims 0.7100 and above

AUD/USD regains the smile, reversing three consecutive daily pullbacks and returning to the area beyond 0.7100 the figure following the Wall St close on Thursday. That said, the softer tone in the US Dollar lends support to the pair’s recovery at the time when market participants continue to digest Wednesday’s hawkish message by the Fed.

USD/JPY looks slightly offered near 156.00 ahead of BoJ

USD/JPY trades with decent losses in the 156.00 region ahead of the opening bell in Asia. Indeed, the pair has faded part of the recent three-day positive streak, faltering just ahead of the 156.50 level. Meanwhile, all the attention is expected to be on the BoJ early on Friday, with investors largely anticipating a 25-bps rate hike.

Gold: Upside appears capped by $4,400

Gold climbs sharply and clinches fresh weekly peaks on Thursday, although the bull run seems to have met some initial hurdle around the $4,400 zone per troy ounce. The yellow metal’s rebound reverses three daily declines in a row and follows the modest retracement in the US Dollar as well as another negative performance of crude oil prices.

Zcash Price Forecast: ZEC eyes $1,500 breakout as retail demand expands

Zcash (ZEC) rises sharply above $1,400 on Thursday as the privacy-focused token defies the broader cryptocurrency market's doldrums this week, driven primarily by macro uncertainty and regulatory headwinds. ZEC’s bullish outlook, though seemingly overextended, remains stable, supported by growing retail demand reflected in the derivatives market.

One hike down, more to come? The Fed’s new rate path says yes

The Federal Reserve (Fed) raised its Fed Fund Target Range (FFTR) range by 25 basis points to 3.75%-4.00% in a unanimous decision, saying the move would support a timelier return to its 2% inflation goal.

How Japan became the World's Banker and why that era may be ending

Japan's ultra-low interest rates helped finance trillions of dollars in global investments for more than a decade, making the Japanese Yen one of the world’s cheapest sources of funding. With the Bank of Japan expected to tighten policy again this week, that advantage may be entering a new phase. While most major economies raised interest rates, Japan remained the world's outlier.