Gold Price Forecast: XAU/USD eases to $1,960 ahead of US inflation, Fed announcements

Gold Price (XAU/USD) begins the key week with mild losses, grinding lower to around $1,961 after witnessing a two-week winning streak. In doing so, the Gold price positions for the US Federal Reserve (Fed monetary policy meeting after cheering the broad US Dollar weakness amid dovish concerns about the Federal Reserve’s next move, backed by downbeat United States data. However, the cautious mood ahead of this week’s United States inflation numbers and other key events challenges the XAU/USD bulks.

Gold Price benefits from dovish Federal Reserve concerns

Gold Price rose for the second consecutive week in the last as market players place heavy bets on the Federal Reserve’s (Fed) no rate hike decision, especially after the last week’s downbeat United States (US) data.

During the last week, downbeat prints of the US activity numbers for May joined disappointing employment clues to weigh on the US Dollar, despite looming economic fears. That said, the latest United States Initial Jobless Claims jumped to the highest levels since September 2021 whereas the US ISM Services PMI, S&P Global PMIs and Factory Orders also printed softer outcomes for May and pushed back the Fed hawks, which in turn weighed the US Dollar and propelled the Gold Price.

That said, US Dollar Index (DXY) dropped in the last two consecutive weeks to 103.56 at the latest, grinding near the bottom.

With this, market players placed higher bets on the US Federal Reserve’s no rate change decision in its June 13-14 policy meeting. That said, the CMEGroup's Fed watch tool suggests around 72% chance of the Fed rate being unchanged to the 5%-5.25% range.

However, Tuesday’s US Consumer Price Index (CPI) data appears crucial for May appears crucial to determine the Fed decision as the United States central bank has always shown readiness to tame inflation with a “whatever it takes” attitude. “US May CPI data will be published just ahead of the FOMC decision and that is adding some uncertainty to the immediate call – a strong core print could force the FOMC’s hand. The median market estimate expects that core inflation rose 0.4% m/m with the headline rate rising 0.2% owing to weaker energy costs,” said Analysts at the ANZ.

Hence, the Gold price remains on the bull’s radar amid the Federal Reserve (Fed) concerns but the cautious mood ahead of this week’s key US data, monetary policy meetings challenges the Gold buyers.

Moving on, monetary policy meeting decisions from the Fed, ECB, and BoJ, as well as key data from the US on inflation and retail sales, and employment numbers from Australia and the UK, will be in the spotlight to offer a volatile week to the Gold traders ahead.

US Inflation, Ex-Fed catalysts prod XAU/USD bulls

While the Federal Reserve (Fed) concerns weigh on the US Dollar and allow the Gold price to remain firmer, the other concerns keep challenging precious metal prices. Among them, are the surprise rate hikes from the Reserve Bank of Australia (BoC), Bank of Canada (BoC) and the concerns that recent downbeat US jobs report isn’t a strong push to the Fed for monetary policy easing.

“The jump in initial claims in the first week of June (261k) to their highest level since September 2021 and the 0.3% rise in May unemployment to 3.7% raises the question of whether the labor market is finally starting to weaken. We think the Fed needs to see a period of sustained labor market weakness to be confident that its policies are working,” said Analysts at the ANZ.

Economic concerns about one of the world’s biggest Gold consumers, namely China, and fears of global recession also prod the Gold buyers. People's Bank of China (PBOC) Yi Gang said in a statement on Friday that China's Q2 GDP YoY growth is expected to be high mainly due to base effects. The policymaker added, “There is plenty of room for policy adjustment.”

With this in mind, Reuters said, “Physical gold demand slowed in China and India this week and forced dealers to offer discounts, with volatile prices in India prompting buyers to delay purchases.” The news also added on Friday that the top consumer China raised gold holdings for a seventh straight month to 67.27 million fine troy ounces by May-end.

Also read: Gold Price Weekly Forecast: XAU/USD faces two-way risks in Fed week

Gold Price Technical analysis

Gold Price fades recovery from a fortnight-old ascending support line, around $1,943 by the press time. Even so, the bullish signals from the Moving Average Convergence and Divergence (MACD) and firmer Relative Strength Index (RSI) line, placed at 14, push back bearish bias.

Hence the XAU/USD is likely to remain sidelined between the aforementioned support line and a one-month-old horizontal resistance area comprising the 200-SMA, respectively near $1,943 and $1,985.

Should the Gold Price break the $1,943 support, the previous monthly low of near $1,932 and the 61.8% Fibonacci Expansion (FE) of the XAU/USD’s moves from May 10 to June 02, near $1,910, will gain the market’s attention.

On the contrary, a clear upside break of $1,943 can quickly propel the Gold Price toward the $2,000 round figure.

Following that, the 61.8% Fibonacci retracement of the pair’s May-June downside, near $2,025, will be in the spotlight.

Overall, the Gold price aptly portrays the market’s indecision ahead of the top-tier data/events.

Gold Price: Four-hour chart

Trend: Limited upside expected