Gold Price looks set to test $1,800 ahead of Fed’s Powell

Gold Price (XAUUSD) extends pullback from a short-term key resistance line as sellers attack the 200-DMA heading into Friday’s European session. In doing so, the precious metal prints 0.50% intraday losses of around $1,847 by the press time. The bullion’s latest weakness could be linked to the US dollar rebound, as well as a technical pullback, amid the market’s indecision ahead of the key catalysts.

Gold Price contrasts with US dollar moves

US Dollar Index (DXY) snaps a two-day downtrend as market players await Fed Chair Jerome Powell. The greenback gauge versus six major currencies bounces off a weekly low amid an indecision phase after two consecutive weeks of gains. It’s worth noting that the DXY rises 0.37% by the press time to 104.30. That said, the US Dollar Index dropped during the last two days amid downbeat yields and softer data while paying a little heed to the Fed’s strongest rate hike since 1994.

Also read: Gold Price Forecast: $1,857 appears a tough nut to crack for XAUUSD bulls – Confluence Detector

Yields remain pressured

US Treasury bond yields stay depressed for the third consecutive day, despite defending the weekly bottom marked the previous day. The benchmark 10-year Treasury yields dropped during the last two consecutive days, down 6.8 basis points (bps) to 3.237% by the press time, as traders rush to bonds amid economic fears and higher rates.

US data favored XAUUSD bulls

Downbeat US data also underpinned the Gold Price strength the previous day as the statistics eased pressure on the Fed after it marked an aggressive rate hike. US Building Permits and Housing Starts eased in May to 1.695M and 1.549M respectively while the Initial Jobless Claims 4-week average inched up to 218.5K versus 215K expected during the period ended on June 10. Further, Philadelphia Fed Manufacturing Survey printed a negative figure of -3.3 for June, the first such contraction since May 2020.

China, Japan fail to impress buyers

Central banks in China and Japan defend the easy money policies despite the rush to tame inflation in the west. The higher funds in Asia, the largest customer of gold, should have favored gold buyers but could not. The reason could be linked to the economic fears due to the covid woes and the Bank of Japan’s (BOJ) readiness to act.

All eyes are on Powell

Federal Reserve Chairman Jerome H. Powell

Federal Reserve (Fed) Chairman Jerome Powell is all set to fuel the XAUUSD moves while speaking at the Inaugural Conference on the International Roles of the US Dollar, in Washington DC. In addition to Fed’s Powell, Fed’s bi-annual Monetary Policy Meeting will also be important to track for the gold traders amid hopes of witnessing hawkish signals, which in turn could direct Gold Price further towards the south.

Technical analysis

Gold Price extends pullback from a downward sloping trend line from early March as it drops back to the 200-DMA level surrounding $1,845.

Given the quote’s failures to cross the key resistance line, coupled with the sluggish MACD and RSI retreat, XAUUSD is likely to extend the latest weakness towards monthly horizontal support near $1,800.

However, an area comprising multiple lows marked since January, around $1,785-80, could challenge the gold bears afterward.

On the flip side, a clear break of the immediate resistance line, close to $1,856-57, isn’t an open call to the buyers as a convergence of the 50-DMA and 61.8% Fibonacci retracement level of December 2021 to March 2022 upside will challenge further run-up near $1,875. Also acting as an upside filter is the monthly peak of around $1,880.

Overall, Gold Price is likely to witness further downside but the fundamental catalysts, mentioned above, are crucial to watch.

Time’s up for the dollar, gold takes centre stage