Gold Price Forecast: XAU/USD remains confined in a range, what's next?
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UPGRADE- Gold price consolidates weekly gains near $2,300 early Friday, eyeing a positive weekly close.
- The US Dollar holds the Fed-inspired upswing, as the US Treasury bond yields rebound.
- Gold price remains stuck between $2,350 and $2,277 but sellers stay hopeful amid bearish RSI.
Gold price is trading on thin ice near the $2,300 level in Asian trades on Friday, consolidating the previous decline. Gold price, however, remains on track to book the first weekly gain in four weeks.
Gold price looks for a positive week, despite the hawkish Fed
Following a down day on Thursday, Gold price is licking its wounds early Friday, as the US Dollar buyers hold onto the recovery induced by the hawkish US Federal Reserve (Fed) policy decision announced on Wednesday.
The Greenback recovered almost the entire US Consumer Price Index (CPI) data-led slide a day ago, notwithstanding the continued sell-off in the US Treasury bond yields across the curve.
Fed held policy rates steady in the range of the range of 5.25%-5.50%, following the June policy meeting on Wednesday. The revised Summary of Economic Projections, the so called dot-plot, indicated the policymakers expect to cut rates only once in 2024, against a projection of three rate cuts in the March forecasts and down from two rate cuts widely anticipated.
The main catalysts behind the ongoing decline in the US bond yields could be attributed to strong Treasury auctions this week. On Thursday, the US government bonds attracted strong auctions of 10s and 30s, not just strong but stops-through of 1.5 bps and 2.0 bps, respectively.
Additionally, record close for the US S&P 500 and Nasdaq indices for the fourth day in a row reduced the attractiveness of the US Treasury bond yields as an alternative higher-yielding asset. However, the US Dollar strength offset the impact of negative Treasury bond yields on Gold price, sending the yellow metal lower.
Soft US Producer Price Index (PPI) data also failed to deter US Dollar buyers. The PPI for final demand unexpectedly dropped 0.2% last month after advancing by an unrevised 0.5% in April, the Labor Department's Bureau of Labor Statistics said on Thursday. The market forecast was for a monthly increase of 0.1% in the reported period.
Attention now turns toward the Univesity of Michigan (UoM) preliminary Consumer Sentiment and Inflation Expectations data due later on Friday for fresh cues on the Fed’s policy outlook and its impact on the US Dollar, eventually influencing the Gold price action.
Further, speeches from the Fed policymakers will be closely scrutinized by market participants, as the end-of-the-week flows will likely remain in play and affect the Gold price movement.
In the meantime, Gold price could find comfort from a pause in the US Dollar resurgence should risk sentiment improve. Also, reports that retail gold demand from Asian consumers is expected to remain robust this year due to geopolitical and macroeconomic uncertainties could induce some dip-buying demand for Gold traders.
Gold price technical analysis: Daily chart
The short-term technical outlook for Gold remains more or less the same, as the Gold price continues to wave in a narrow range, with the upside capped by the confluence of the 21-day Simple Moving Average (SMA) and the 50-day SMA near $2,350. On the other hand, the downside appears guarded by the May 3 low of $2,277.
That said, the downside potential remains intact as the 14-day Relative Strength Index (RSI) stays well below the 50 level, currently near 45.00.
Further, a potential Bear Cross also keeps Gold sellers hopeful. The 21-day SMA is on the verge of crossing the 50-day SMA from above, which if happens will validate the bearish crossover.
The immediate support is now seen at the $2,300 threshold, below which the June 10 low of $2,287 will come into play,
A sustained break below the latter will retest the May 3 low of $2,277, as sellers aim for the $2,250 psychological barrier.
Alternatively, any rebound in Gold price will need acceptance above key confluence support-turned-resistance near $2,350, where the 21-day and 50-day SMAs merge.
Gold buyers will then flex their muscles toward the May 24 high of $2,364 on their way to the June 7 high of $2,388.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
- Gold price consolidates weekly gains near $2,300 early Friday, eyeing a positive weekly close.
- The US Dollar holds the Fed-inspired upswing, as the US Treasury bond yields rebound.
- Gold price remains stuck between $2,350 and $2,277 but sellers stay hopeful amid bearish RSI.
Gold price is trading on thin ice near the $2,300 level in Asian trades on Friday, consolidating the previous decline. Gold price, however, remains on track to book the first weekly gain in four weeks.
Gold price looks for a positive week, despite the hawkish Fed
Following a down day on Thursday, Gold price is licking its wounds early Friday, as the US Dollar buyers hold onto the recovery induced by the hawkish US Federal Reserve (Fed) policy decision announced on Wednesday.
The Greenback recovered almost the entire US Consumer Price Index (CPI) data-led slide a day ago, notwithstanding the continued sell-off in the US Treasury bond yields across the curve.
Fed held policy rates steady in the range of the range of 5.25%-5.50%, following the June policy meeting on Wednesday. The revised Summary of Economic Projections, the so called dot-plot, indicated the policymakers expect to cut rates only once in 2024, against a projection of three rate cuts in the March forecasts and down from two rate cuts widely anticipated.
The main catalysts behind the ongoing decline in the US bond yields could be attributed to strong Treasury auctions this week. On Thursday, the US government bonds attracted strong auctions of 10s and 30s, not just strong but stops-through of 1.5 bps and 2.0 bps, respectively.
Additionally, record close for the US S&P 500 and Nasdaq indices for the fourth day in a row reduced the attractiveness of the US Treasury bond yields as an alternative higher-yielding asset. However, the US Dollar strength offset the impact of negative Treasury bond yields on Gold price, sending the yellow metal lower.
Soft US Producer Price Index (PPI) data also failed to deter US Dollar buyers. The PPI for final demand unexpectedly dropped 0.2% last month after advancing by an unrevised 0.5% in April, the Labor Department's Bureau of Labor Statistics said on Thursday. The market forecast was for a monthly increase of 0.1% in the reported period.
Attention now turns toward the Univesity of Michigan (UoM) preliminary Consumer Sentiment and Inflation Expectations data due later on Friday for fresh cues on the Fed’s policy outlook and its impact on the US Dollar, eventually influencing the Gold price action.
Further, speeches from the Fed policymakers will be closely scrutinized by market participants, as the end-of-the-week flows will likely remain in play and affect the Gold price movement.
In the meantime, Gold price could find comfort from a pause in the US Dollar resurgence should risk sentiment improve. Also, reports that retail gold demand from Asian consumers is expected to remain robust this year due to geopolitical and macroeconomic uncertainties could induce some dip-buying demand for Gold traders.
Gold price technical analysis: Daily chart
The short-term technical outlook for Gold remains more or less the same, as the Gold price continues to wave in a narrow range, with the upside capped by the confluence of the 21-day Simple Moving Average (SMA) and the 50-day SMA near $2,350. On the other hand, the downside appears guarded by the May 3 low of $2,277.
That said, the downside potential remains intact as the 14-day Relative Strength Index (RSI) stays well below the 50 level, currently near 45.00.
Further, a potential Bear Cross also keeps Gold sellers hopeful. The 21-day SMA is on the verge of crossing the 50-day SMA from above, which if happens will validate the bearish crossover.
The immediate support is now seen at the $2,300 threshold, below which the June 10 low of $2,287 will come into play,
A sustained break below the latter will retest the May 3 low of $2,277, as sellers aim for the $2,250 psychological barrier.
Alternatively, any rebound in Gold price will need acceptance above key confluence support-turned-resistance near $2,350, where the 21-day and 50-day SMAs merge.
Gold buyers will then flex their muscles toward the May 24 high of $2,364 on their way to the June 7 high of $2,388.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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