Gold Price Forecast: XAU/USD range-play extends ahead of US Retail Sales data, Fedspeak

Gold price picks up fresh bids, despite a risk-on market sentiment.
The US Dollar attempts a bounce even as the US Treasury bond yields turn south again.
The path of least resistance appears down for Gold price amid a Bear Cross and a bearish RSI.
US Retail Sales data and Fedspeak remain on Gold traders’ radars.

Gold price is making a minor recovery attempt early Tuesday after witnessing a negative start to the week on Monday. Despite the bounce, Gold price looks vulnerable amid a renewed US Dollar uptick, as traders reposition ahead of speeches from a bunch of Federal Reserve (Fed) policymakers and the high-impact US Retail Sales data.

Gold price tracks US Treasury bond yields move

Gold price has been tracking the moves in the US Treasury bond yields so far this week, pausing its previous decline amid a modest weakness in the US Treasury bond yields. With an extension of the Wall Street risk rally into Asia, however, it remains to be seen if Gold price remains supported in the lead-up to the US economic docket.

Additionally, if the US Dollar rebound gains traction on robust Retail Sales data or hawkish remarks from Fed policymakers, Gold price could come under renewed selling pressure. US Retail Sales are expected to rise 0.2% MoM in May after reporting no growth in April. The core Retail Sales are likely to increase by 0.2% in May, at the same pace seen in April.

Meanwhile, the Fed speakers include Barkin, Kugler, Logan, Musalem and Goolsbee. Any hints from the officials warranting caution on inflation or pushing back against rate cuts will inject a fresh bout of strength into the US Dollar at the expense of Gold price.

Gold price technical analysis: Daily chart

Despite the range-play seen in Gold price over the past week, risks remain skewed to the downside.

The Gold price upside is capped by the confluence zone of $2,345, where the 21-day Simple Moving Average (SMA) and the 50-day SMA hang around. On the other hand, the downside appears guarded by the May 3 low of $2,277.

The 14-day Relative Strength Index (RSI) stays bearish below the 50 level, currently near 48.00, justifying the downside risks.

Adding credence to the bearish potential, the 21-day SMA crossed the 50-day SMA from above on a daily closing basis on Friday, validating a Bear Cross.

The immediate support is now seen at the $2,300 threshold, below which the June 10 low of $2,287 will be tested.

A sustained break below the latter will threaten 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 the aforementioned key confluence support-turned-resistance near $2,345.

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

Why do people invest in Gold?

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.

Who buys the most Gold?

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.

How is Gold correlated with other assets?

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.

What does the price of Gold depend on?

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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