|

Gold Price Forecast: XAU/USD tumble amidst strong USD, Fed’s Powell testimony looms

  • XAU/USD trades at $1932.42 after a sharp fall due to a stronger USD, with traders watching for Fed Chair Powell’s testimony.
  • Despite Fed officials’ predictions of a 50 bps increase to FFR, market participants anticipate only a 25 bps hike.
  • Depending on his tone, Fed Chair Powell’s testimony could impact USD and Gold prices.

Gold price tumbled sharply in the North American session as trading resumed after a holiday in the United States (US). A stronger US Dollar (USD) is the main reason behind XAU/USD’s fall, as the US Treasury bond yield slid, with traders eyeing Federal Reserve (Fed) Chair Jerome Powell’s testimony at the US Congress. At the time of writing, XAU/USD is trading at $1932.42 after hitting a daily high of $1956.74.

Expectations for a rate hike put pressure on XAU/USD prices, with markets keenly awaiting Powell’s upcoming Congress appearance

US equities continue to trade negatively. The US 10-year benchmark note dropped more than ten basis points at 3.707%, a tailwind for Gold prices, which remained downward pressured. Even though the CME FedWatch Tool shows, traders expect a 25 bps increase at the July Federal Reserve Open Market Committee (FOMC) meeting. It should be said that despite Federal Reserve officials forecasting 50 bps increases to the Federal Funds Rate (FFR), market participants are not, as shown by CME data.

In the meantime, US State Secretary Anthony Blinken reunited with Chinese President Xi Jinping to improve ties between but countries. Still, they failed to get an agreement on better military communication. Expectations for growth in China have been revised downward as the People’s Bank of China (PboC) has cut rates three times in the last ten days, aiming to stimulate the economy.

Aside from this, Fed Chair Jerome Powell will appear at the US Congress on Wednesday and Thursday. Traders expect the Chair to keep his press conference tone, but any hawkish surprises can bolster the US Dollar, and weaken Gold, as it would underpin US Treasury bond yields higher. However, any dovish signals and the greenback would be punished by market participants.

On the data front, US housing starts soaring to a 13-month high, up 21.7% MoM in May, crushing April’s -2.9% contraction, while Building Permits rose by 5.2%, exceeding last month’s -1.4% plunge.

Upcoming events

The US economic docket would be busy with Fed officials crossing the wires, led by Fed Chair Powell. Initial Jobless Claims and Existing Home Sales will be featured on Thursday.

XAU/USD Price Analysis: Technical outlook

XAU/USD Daily chart

XAU/USD resumed its downward path after breaking a descending symmetrical triangle, breaking dynamic support at the 100-day Exponential Moving Average (EMA) at $1939.56. Immediate support lies at $1925.06, June 15 swing low, ahead of nosediving toward $1900. Of note, oscillators warrant further downside, as the Relative Strength Index (RSI) indicator portrays sellers in charge, while the three-day Rate of Change (RoC) shifted gears to the downside after back-to-back positive sessions. Conversely, if XAU/USD reclaims $1950, that could cap XAU/USD’s losses, but a break above the 20-day EMA, at  $1957.13, could offer additional support to the yellow metal.

XAU/USD

Overview
Today last price1935.77
Today Daily Change-14.28
Today Daily Change %-0.73
Today daily open1950.05
 
Trends
Daily SMA201955.7
Daily SMA501984.5
Daily SMA1001942.31
Daily SMA2001848.8
 
Levels
Previous Daily High1958.85
Previous Daily Low1947.86
Previous Weekly High1971.01
Previous Weekly Low1924.85
Previous Monthly High2079.76
Previous Monthly Low1932.12
Daily Fibonacci 38.2%1952.06
Daily Fibonacci 61.8%1954.65
Daily Pivot Point S11945.66
Daily Pivot Point S21941.26
Daily Pivot Point S31934.67
Daily Pivot Point R11956.65
Daily Pivot Point R21963.24
Daily Pivot Point R31967.64

Author

Christian Borjon Valencia

Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.

More from Christian Borjon Valencia
Share:

Editor's Picks

AUD/USD holds above multi-month lows and 0.6900 ahead of Fed's Warsh

AUD/USD struggles to capitalize on the previous day's modest bounce from its lowest level since early July and trades above 0.6900 during the Asian session on Friday. Thursday's disappointing Australian jobs data tempered RBA rate-hike bets, capping the Aussie. The US Dollar (USD), meanwhile, is regaining positive traction as this week's hot US CPI and PPI reports keep Fed rate hike bets firmly on the table. This further keeps a lid on the pair ahead of Fed Chair Kevin Warsh speech.

USD/JPY climbs above 158.00 as USD edges higher ahead of Warsh's speech

USD/JPY attracts some buyers during the Asian session on Friday, building on the overnight bounce from the vicinity of 157.50, or a one-week low, amid the emergence of some US Dollar buying. This week's hot US CPI and PPI reports lifted Fed rate-hike bets, which, along with stable US bond yields and geopolitical uncertainties, help revive USD demand. Traders, however, remain on high alert amid speculation that authorities will step in to prop up the Japanese Yen, which could cap the currency pair ahead of Fed Chair Kevin Warsh's speech.

Gold weakens to $4,150 amid reviving USD demand as traders await Warsh's speech

Gold drifts lower during the Asian session on Friday, reversing part of the previous day's move up amid reviving US Dollar demand. US inflation data released this week reaffirmed bets for at least one Fed rate hike this year, while US bond yields stabilize after Thursday's steep decline. This, along with geopolitical risks, underpins the safe-haven USD, which, in turn, is seen weighing on bullion ahead of Fed Chair Kevin Warsh's speech.

Ethereum reclaims $2,400 as PPI hits 6.3% and yields fall
Ethereum (ETH) is back above $2,400 on Thursday, rebounding from a brief decline toward $2,340, which was sparked by an upside surprise in the US wholesale inflation report. The Producer Price Index (PPI) increased 1.3% monthly and 6.3% annually in September, far above expectations of 0.5% and 5.3%, respectively.
The Iran war will eventually end. Tariffs won't. Here's the problem
Two cost shocks are in the September Consumer Price Index (CPI), and they have different half-lives. Energy is up 20.4% on the year and accounts for about 1.3 points of the 3.7% headline, and that shock reverses when Oil does: Brent was back at its pre-war price on July 1 and above $100 again by the end of the month, after the ceasefire collapsed on July 8.
Everyone's dumping Gold after hot US inflation. Here's why $4,100 could be a floor, not a cliff
Gold (XAU/USD) is recovering from a sharp sell-off triggered by hotter-than-expected United States (US) inflation data released on Wednesday. The precious metal briefly plunged toward $4,073 as investors increased their bets on further Federal Reserve (Fed) interest rate hikes before recovering as US Treasury yields and the US Dollar (USD) reversed their initial gains.