Gold Price eyes new multi-week lows as key support fails

Gold Price stays on the back foot mid-week pressured by rising US Treasury bond yields and the renewed dollar strength. The near-term technical outlook suggests that XAUUSD could suffer additional losses with the 200-day SMA turning into resistance.

Focus shifts to US data

Investors await the May ISM Manufacturing PMI. The US economic docket will feature April Construction Spending and JOLTS Job Openings data as well. Finally, the US Federal Reserve will release its Beige Book. In case the 10-year US T-bond yield manages to build on its weekly gains and push toward 3%, gold could find it difficult to attract buyers. It's also worth noting that the Federal Reserve Bank of St. Louis' hawkish president James Bullard is scheduled to deliver a speech at 17:00 GMT.

Also read: Gold Price Forecast: XAUUSD eyes a retest of the $1,800 mark, US data in focus.

Inflation fears weigh on Gold Price

Although the latest Personal Consumption Expenditures (PCE) Price Index data from the US revived optimism that inflation may have peaked in April, analysts grow increasingly concerned over prices remaining uncomfortably high for longer than expected. In an interview with CNN's Wolf Blitzer on Tuesday, US Treasury Secretary Janet Yellen admitted that she was wrong about the path that inflation would take. Yellen further noted that they cannot rule out further inflationary shocks amid rising energy prices.

Inflation fears

On the same matter, Federal Reserve policymaker Raphael Bostic told MarketWatch that the Fed wants to move its policy rate to a range of 2% to 2.5% toward the end of 2022. Bostic added that he would be "fully comfortable" lifting rates into a range that could restrict growth if inflation were not moving down significantly at that point. In turn, the benchmark 10-year US T-bond yield is already up more than 4% this week, forcing gold to lose interest. 

Reflecting the positive impact of rising US yields on the dollar's market valuation, the US Dollar Index, which closed the previous two weeks in negative territory, is already up 0.8% since Monday above 102.00. The ISM manufacturing PMI survey's Prices Paid component is forecast to rise to 86.2 in May from 84.6 in April. A stronger-than-expected increase in input prices could dampen hopes of a steady decline in inflation and allow the dollar to continue to gather strength. In such a scenario, XAUUSD could extend its weekly slide.

Meanwhile, the central bank of Russia argued that a possible seizure of its frozen reserves as part of Western sanctions could cause other central banks to rethink their saving strategies. "One could expect an increase in demand for gold and a decline in the US dollar's and the euro's role as reserve assets," the bank said in its financial stability report. Nevertheless, these remarks failed to help XAUUSD gain traction.

Gold Price technical outlook

Gold Price turned bearish in the near term after having closed below the critical 200-day SMA on Tuesday. Furthermore, the Relative Strength Index (RSI) indicator on the daily chart edged lower to 40, suggesting that sellers look to dominate the price action.

On the downside, $1,810, the end-point of the downtrend that started mid-April, aligns as the next bearish target before $1,800 (psychological level).

$1,840 (200-day SMA) aligns as initial resistance. In case XAUUSD reclaims that level and starts using it as support, buyers could take action and trigger another leg higher. In that case, $1,850 (Fibonacci 23.6% retracement of the downtrend) and $1,865 (static level) could be seen as the next hurdles. 

Gold Price and the commodity supercycle