Gold Price Forecast: XAU/USD rebounds from a three-month low, bolstered by soft USD, falling bond yields

Gold price bounced off three-month lows of $1925.06, spurred on by a soft US Dollar (USD) and falling US bond yields as the main factors underpinning Gold. At the time of writing, the XAU/USD is trading at $1958.50 a troy ounce, up 0.86%.

Market skepticism over Fed’s rate hikes projections boosts Gold

Sentiment remains upbeat, even though the Fed’s announced additional hikes needed after holding rates unchanged. Even though the Fed’s decision weakened Gold prices, market participants remain skeptical about the Fed, as US Treasury bond yields retraced from Wednesday’s highs.

The US economic agenda revealed that Retail Sales surprisingly rose in May by 0.3% MoM surpassing estimates but trailing April’s figures. At the same time, the US Department of Labor released the Initial Jobless Claims for the last week, topping forecasts of 249K, it came at 262K, printing back-to-back negative jobs data, indicating the labor market is easing.

Industrial Production showed a further deterioration, contracting -0.2% MoM, missing estimates of 0.1% expansion. Recently, the New York and Philadelphia Fed Manufacturing Indices came mixed, with the NY rebounding unexpectedly after May’s plunge, while the Philly further deteriorated but at a slower pace.

The US Dollar Index (DXY), a gauge that measures the buck’s value vs. a basket of six currencies, tumbles 0.77%, down at 102.209 after hitting a one-month low, while the US 10-year benchmark note yields 3.729%, losses six basis points, from its opening price.

The CME FedWatch Tool shows odds for a 25 bps rate hike in July stand at 67%, but traders in the swaps market expect no additional hikes. Investors estimate the Fed would slash rates as early as January 2024, expecting six rate cuts towards December 2024, with the Federal Funds Rate (FFR) seen at 3.50%-3.75%.

Upcoming events

The Fed parade would begin once officials are officially released from the blackout period, ahead of the June meeting, led by the St. Louis Fed President James Bullard. On the data front, the US Consumer Sentiment from the University of Michigan (UoM) and American inflation expectations are expected.

XAU/USD Price Analysis Technical outlook

From a technical perspective, the XAU/USD will likely remain sideways after reclaiming the 100-day Exponential Moving Average (EMA) at $1939.26, as the yellow metal slipped to new three-month lows of $1925.06 earlier. On the upside, XAU/USD is capped by the 20 and 50-day EMAs, each at $1961.52 and $1965.76, respectively. Up next, a resistance trendline from the broken descending symmetrical triangle lies around the $1965-75 area before Gold’s test of June 2 high at $1983.44. On the downside, the XAU/USD first support would be the psychological $1950 level, followed by the 100-day EMA.