Gold Price Forecast: XAU/USD edges higher as US Dollar, yields dribble on mixed Fed concerns

Gold Price (XAU/USD) seesaws around $1,963 amid the early hours of Wednesday’s Asian session, after a two-day rebound within a short-term trading range. In doing so, the XAU/USD pays little heed to the US Dollar’s slightly positive performance as sluggish markets and lack of major data/events direct traders towards the Gold as a safe investment. Also, looming uncertainty about the Federal Reserve’s (Fed) next move joins risk-positive headlines from China adding strength to the Gold Price.

Gold Price remains sturdy amid sluggish markets, US Dollar

Gold Price rose in the last two consecutive days while bouncing off a three-week-old trading range’s bottom even as the global markets remain sluggish. The reason could be linked to the downbeat United States activity data released on Monday, as well as the previously dovish comments from the Federal Reserve (Fed) Officials ahead of the pre-Fed blackout. That said, the US Purchasing Managers’ Indexes (PMIs) for May came in softer than expected and raised concerns that the US central bank has lesser scope to extend the rate hike trajectory.

Furthermore, upbeat headlines surrounding China, one of the world’s biggest Gold consumers, also favor the XAU/USD Price. After witnessing disappointment from the activity data in the last week, Beijing reported an upbeat Caixin Services PMI for May. Also positive was the news suggesting China’s measures to enable major banks in the nation to unleash more lending capacity. Additionally, concerns that the diplomatic talks between the US and Chinese policymakers were positive in the last round also underpin the Gold Price rebound.

Elsewhere, the US Dollar prints mild gains amid sluggish markets with no major data/events and an absence of the Federal Open Market Committee (FOMC) members’ speeches due to the pre-Fed blackout period. With this, the US Dollar Index (DXY) rose 0.13% on a day to 104.12 by the end of Tuesday.

A resolution to the United States default fears propelled bond offerings from the government but marked a mixed response on the yields as the 10-year coupons remain sluggish at around 3.69% whereas the two-year counterparts rose a bit to 4.50%. On the same line, the technology stocks remained firmer but the manufacturing ones weighed on the sentiment and pared Wall Street’s gains. Even so, the US equities closed with minor gains. With this, the market’s indecision drives traders towards the Gold buying.

Looking forward, a light calendar can keep the Gold traders troubled but today’s China and US trade numbers, as well as developments surrounding the Federal Reserve (Fed) bets, currently suggest a 24% chance of a 25 bps rate hike in June, can direct the XAU/USD price.

Gold Price Technical Analysis

Gold Price fades bounce off a three-month-old horizontal support area, recently sidelined, while staying within a trading range established since mid-May.

That said, the precious metal’s weakness takes clues from the near-50 level of the steady Relative Strength Index (RSI) line, placed at 14. However, the looming bull cross on the Moving Average Convergence and Divergence (MACD) indicator challenges the XAU/USD bears.

Hence, the bullion’s downside appears limited to the previously mentioned broad support region surrounding $1,937-33.

Following that, the 61.8% Fibonacci retracement of the metal’s March-May upside, near $1,912, can act as the last defense before dragging the Gold Price to the $1,900 round figure.

Meanwhile, recovery moves have a comparatively bumpier road to travel as the stated three-week-old trading range’s peak joins the 200-SMA to highlight $1,990 as a tough nut to crack for the XAU/USD bulls.

In a case where the Gold Price crosses the $1,990 hurdle, the $2,000 round figure may act as an extra check towards the north.

Gold Price: Four-hour chart

Trend: Limited downside expected