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Gold Price Forecast: XAU/USD ticks lower to $1,970 level, focus remains on FOMC minutes

  • Gold price meets with a fresh supply on Wednesday, though the downside seems cushioned.
  • Hawkish Federal Reserve expectations underpin the US Dollar and cap gains for the XAU/USD.
  • Looming recession risks and US debt ceiling woes could lend support to the safe-haven metal.

Gold price struggles to capitalize on its modest intraday uptick and attracts some selling near the $1,980 region during the early European session on Wednesday. The XAU/USD drops back closer to the $1,970 level in the last hour and for now, seems to have stalled the overnight bounce from the vicinity of the monthly low touched last week.

Hawkish Federal Reserve expectations cap gains for Gold price

The recent hawkish remarks by several Federal Reserve (Fed) officials raised the possibility of further rate hikes, with markets now pricing in a 30% chance of another 25 basis points (bps) lift-off in June. This turns out to be a key factor acting as a headwind for the non-yielding Gold price. Hence, the market focus will remain glued to the release of the Federal Open Market Committee (FOMC) meeting minutes, due later during the US session. Investors will look for clues about the future rate-hike path, which will play a key role in influencing the near-term US Dollar (USD) price dynamics and provide a fresh directional impetus to the XAU/USD.

US debt ceiling woes and looming recession risks lend support to XAU/USD

In the meantime, the lack of progress in talks over increasing the United States (US) debt ceiling, along with worries about a global economic slowdown, could limit the downside for the safe-haven Gold price. It is worth recalling that Representatives of President Joe Biden and congressional Republicans ended another round of debt ceiling negotiations on Tuesday without an agreement to raise the government's $31.4 trillion borrowing limit. This raises fears of an unprecedented American debt default and weighs on investors' sentiment. Apart from this, looming recession risks might further hold back bears from placing aggressive bets around the XAU/USD.

Bullish US Dollar might continue to act as a headwind for Gold price

The market concerns resurfaced on Tuesday after the flash Eurozone PMIs showed that the overall business activity slowed slightly more than anticipated as the dominant services industry lost a little of its shine and the downturn in the manufacturing sector deepened in May. This comes on the back of dismal Chinese macro data released last week, which indicated that the world's second-largest economy underperformed in May. This, in turn, warrants some caution before positioning for the resumption of the recent pullback from the all-time high. The upside potential, meanwhile, seems limited amid the underlying bullish sentiment surrounding the USD.

In fact, the USD Index (DXY), which tracks the Greenback against a basket of currencies, holds steady near a two-month high touched on Tuesday amid firming expectations that the Fed will keep interest rates higher for longer. This might continue to undermine demand for the US Dollar-denominated Gold price ahead of the crucial FOMC meeting minutes. Traders will further take cues from the US debt ceiling negotiations, which, along with the US bond yields, will drive the USD demand. Apart from this, the broader risk sentiment might further contribute to producing short-term trading opportunities around the XAU/USD.

Gold price technical outlook

From a technical perspective, the $1,955-$1,950 region now seems to have emerged as an immediate strong support. This is followed by the 100-day Simple Moving Average (SMA), currently pegged around the $1.935-$1,930 area. A convincing break below the latter will be seen as a fresh trigger for bearish traders and expose the $1,900 round-figure mar.

On the flip side, the $1,980-$1,984 supply zone might continue to act as a strong barrier, which if cleared decisively could trigger a short-covering rally. The Gold price might then aim to reclaim the $2,000 psychological mark and climb further towards the next relevant hurdle near the $2,020-$2,025 region. Some follow-through buying will negate any near-term negative outlook and shift the bias back in favour of bullish traders. 

Key levels to watch

XAU/USD

Overview
Today last price1971.93
Today Daily Change-3.28
Today Daily Change %-0.17
Today daily open1975.21
 
Trends
Daily SMA202002.67
Daily SMA501990.96
Daily SMA1001931.91
Daily SMA2001827.68
 
Levels
Previous Daily High1977.81
Previous Daily Low1954.28
Previous Weekly High2022.18
Previous Weekly Low1952.01
Previous Monthly High2048.75
Previous Monthly Low1949.83
Daily Fibonacci 38.2%1968.82
Daily Fibonacci 61.8%1963.27
Daily Pivot Point S11960.39
Daily Pivot Point S21945.57
Daily Pivot Point S31936.86
Daily Pivot Point R11983.92
Daily Pivot Point R21992.63
Daily Pivot Point R32007.45

Author

Haresh Menghani

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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