Gold Price Forecast: XAU/USD rebounds amid recession fears, slowing global economic growth

• Gold recovers, rising 0.69% to $1926.30, amid global recessionary fears and faltering US bond yields.
• A worldwide slowdown in business and manufacturing activity stokes investor concerns and drives a shift to safe assets.
• Market participants focus on Fed speeches for rate hike insights; current odds are 74.4% for a 25-bps hike in July.

Gold price recovers some ground after falling to new three-month lows of $1910.26 overnight, while US bond yields retreat after printing weekly highs, spurred by central bank tightening. Global data revealed the economic slowdown, sparking recessionary fears. The XAU/USD is trading at $1926.30, gains 0.69%.

XAU/USD gains as investors seek safe havens amid deteriorating business and manufacturing activity worldwide

Investors sentiment shifted sour, as shown by global equities printing losses. Data delivered worldwide, but particularly in the United States (US), showed that business and manufacturing activity is deteriorating, as reported by June’s S&P Global Manufacturing, Services, and Composite PMIs.

In the US, the Manufacturing PMI rose 46.3, below estimates of 48.6 and the prior month’s reading of 48.4, while the Services stood at 54.1, exceeding forecasts, but trailed May’s 54.9. Therefore, the composite PMI decelerated from 54.3 to 53 in June, the slowest reading since March.  

On the data, S&P Global Market Intelligence Chief Economist Chris Williamson said, “The overall rate of expansion of business activity in the US remained robust in June, consistent with GDP rising at a rate of 1.7% to put second-quarter growth in the region of 2%.”

XAU/USD got a lifeline by falling US real yields from 1.58% on Thursday to 1.508% at the time of writing. Real yields represent the difference between the rate of inflation and interest rates. Nevertheless, XAU/USD traders should be focused on Fed speaking, which had remained more hawkish than before the June FOMC meeting.

The San Francisco Fed President Mary Daly crossed the wires, commenting that she supports two more rate increases and that the risks of under/overtightening have come into balance.

As shown by the CME FedWatch Tool, money market futures portray odds at a 74.4% chance for a 25-bps rate hike in July, but traders do not expect the Fed to lift rates past the 5.25%-5.50% threshold.

In the meantime, the inversion of the US 2s-10s yield curve fell as much as ten bps, signaling that market participants are pricing in a recession in the United States. That dampened the market sentiment on Wall Street, as the three major US equity indices dropped between 0.64% and 1.13%.

XAU/USD Price Analysis: Technical outlook

Given the fundamental backdrop, XAU/USD would remain neutral to downward biased, with buyers and sellers strictly focused on the June 15 swing low price at $1925.06. A daily close below the latter will be cheered for sellers as they will eye a $1900 test. Once cleared, that can open the door to challenge the 200-day Exponential Moving Average (EMA) at $1895.16. Contrarily if buyers reclaim the abovementioned level, which will keep XAU/USD prices trading within the $1925-$1950 range.