Gold Price Forecast: XAU/USD bears ignore sluggish USD on mixed growth concerns, hawkish central banks

Gold Price (XAU/USD) remains bearish around the weekly low after snapping a two-day winning streak with a heavy loss to around $1,939 by the press time of early Thursday morning in Asia. In doing so, the precious metal bears the burden of the market’s fears of slowing economic growth and higher rates, as well as the firmer United States Treasury bond yields, even if the US Dollar remains sluggish.

Gold Price suffers from fears of economic slowdown, higher rates

Gold Price bears the burden of the recent challenges to the major economies, as perceived from the latest downbeat statistics from the United States, China, Europe and the UK. Adding strength to the economic pessimism are the fears of higher interest rates from the top-tier central banks, especially after the latest hawkish surprises from the Reserve Bank of Australia and the Bank of Canada (BoC).

“The global economy is set for a weak recovery over the coming years as persistent core inflation and tighter monetary policy weigh on demand,” per the latest Organisation for Economic Co-operation and Development (OECD) report published Wednesday. The same raises doubts on the XAU/USD demand as China trade numbers trace the last week’s downbeat activity data while the German Industrial Production followed the previous day’s Factory Orders after marking the easy growth figure earlier. That said, the US activity numbers have been downbeat and the Goods And Services Trade Balance also disappointed the previous day.

Not only the growth fears but the concerns surrounding the higher rates amid sluggish economic transition also weigh on the Gold Price.

On Wednesday, the Bank of Canada (BoC) surprised markets by announcing 25 basis points (bps) increase to increase the benchmark interest rate, to 4.75%, versus market expectations supporting no change in the previous rate of 4.50%. Earlier in the week, the RBA surprised markets for the second time in a row by announcing a 25 basis points (bps) rate hike.

Elsewhere, the market’s bets on the Federal Reserve’s 25 bps rate hike in July increased, even as the June Federal Open Market Committee (FOMC) is likely to keep the rates unchanged. Even so, the OECD said, “(It) sees US Fed funds rate peaking at 5.25%-5.5% from Q2 2023, followed by two ‘modest’ cuts in H2 2024.”

Rising yields weigh on the XAU/USD

With the growth fears and hawkish central bank actions, as well as signals, the US Treasury bond yields rallied and weighed on the Gold Price the previous day. That said, the benchmark US 10-year Treasury bond yields rose the most in five weeks to 3.79% while the two-year counterpart marched to 4.52% at the latest.

It should be noted that the looming fears of a $1.0 bond issuance by the United States Treasury Department, due to the debt-ceiling deal, also prods the market sentiment and weigh on the bond price, as well as bolster the yields. The same exert downside pressure on the Gold Price.

While portraying the mood, Wall Street closed in the red whereas commodities and Antipodeans closed in the red.

Looking forward, growth numbers from Japan and Europe will join the weekly US Jobless Claims to entertain the Gold traders but risk catalysts and the bond market moves will be crucial to watch for clear directions.

Gold Price Technical Analysis

Gold Price breaks a one-week-old ascending support line while reversing the previous weekly gains.

That said, the steady conditions of the Relative Strength Index (RSI) line, placed at 14, join a looming bear cross on the Moving Average Convergence and Divergence (MACD) indicator to suggest further grinding of the XAU/USD towards the south.

With a clear downside break of the aforementioned support line, now resistance near $1,943, the Gold Price confirms a fall toward the monthly, as well as the yearly low, marked in the last week around $1,932.

In a case where the XAU/USD remains bearish past $1,932, the odds of witnessing a fall towards the 61.8% Fibonacci Expansion (FE) of May 10 to June 02 moves, near $1,910, can’t be ruled out.

On the contrary, the Gold Price recovery remains elusive unless the quote crosses the three-week-old horizontal resistance area surrounding $1,985, quickly followed by the 200-SMA level of around $1,987. That said, the support-turned-resistance line restricts immediate upside near $1,943.

Even if the XAU/USD crosses the $1,987 hurdle, the $2,000 psychological magnet will be crucial for the Gold buyers to surpass to tighten the grip.

Gold Price: Four-hour chart

Trend: Further downside expected