• Gold’s rise was capped by US bond yields despite concerns for a gloomy economic outlook in the US sparked by weakness in business activity.
  • The US Federal Reserve is expected to maintain interest rates unchanged at the June reunion, but recent central bank decisions worldwide suggest tightening monetary conditions loom.
  • Technical analysis of XAU/USD suggests a potential inverse head-and-shoulders pattern, with a crucial resistance confluence of the 50 and 20-day EMAs to validate it.

Gold price retreats after hitting a daily high of $1966.34 as US bond yields edge higher, a headwind for the yellow metal. Investors sentiment is negative after reports of business activity in the United States (US) raised worries about a recession, underpinned the US Dollar (USD) by last week’s Federal Reserve (Fed) dovish comments, cushioned XAU/USD fall. At the time of writing, XAU/USD is trading at $1959.40, with losses of 0.10%.

Investor sentiment cools Gold’s rally as increasing US bond yields and signs of persistent inflation pressure the precious metal.

Sentiment improvement keeps the Gold price pressured. After dropping sharply on Monday, US Treasury bond yields recover, with the 10-year note rate at 3.708%, two basis points higher than the open, while US 10-year TIPS, a proxy for real yields, are at 1.521%, above the 1.50% mark, after Monday’s close below the latter.

Gold witnessed an increase in flows after the Institute for Supply Management’s (ISM) May figures for manufacturing and services painted a gloomy scenario in the United States (US). Even though the US jobs report was outstanding, with May Nonfarm Payrolls printing 339K jobs added to the economy, the Unemployment Rate advancing 0.3% to 3.7%, eased the Fed’s job of tackling stubbornly sticky inflation. That triggered a jump in US bond yields as investors disregarded a possible rate hike in June.

Traders expect a 76% chance that the US Federal Reserve would keep rates unchanged at the June 13-14 reunion, as shown by the CME Fed Watch Tool. Nevertheless, it should be noted that some central banks that paused rate hikes earlier re-engaged toward tightening monetary conditions as inflation proves to be persistent.

Amongst those, the latest surprise happened Tuesday early in the Asian session, with the Reserve Bank of Australia (RBA) lifting rates for the second straight meeting. Gold traders should remember that the RBAs skipped a meeting, just to witness a jump in inflation and wages. After that, 50 bps of tightening had been added to its cash rate, now at 4.10%.

On Wednesday’s Bank of Canada (BoC) decision, which also paused its tightening cycle but sounded more hawkish than expected on the latest meeting. TDS analysts noted, “We look for the BoC to hike by 25bp in June and 25bp in July. Ongoing economic resilience will lengthen the path back to 2.0% inflation, and as such, we believe the BoC needs to tighten further.” Furthermore, “Recent data have cleared the bar to additional hikes.”

Given the backdrop, we will see what the Federal Reserve decides the next week, but current central bank decisions could delineate what the Fed could do.

XAU/USD Price Analysis: Technical outlook

XAU/USD Daily chart

XAU/USD daily chart suggests the yellow metal is trading sideways, but an inverse head-and-shoulders could be forming. However, to validate the chart pattern, XAU/USD must rally past the confluence of the 50 and 20-day Exponential Moving Averages (EMAs) at $1969.90 and $1970.41, respectively. Once cleared, that would pave the way for the last week’s high of $1983.44, before aiming toward the May 12 low-shifted resistance at  $1985.43, on XAU’s path toward the $2000 mark. Conversely, the pattern would be negated if XAU/USD tumbles below the 100-day EMA at $1937.19, followed by the May 30 daily low of $1932.20.

XAU/USD

Overview
Today last price 1960.39
Today Daily Change -1.42
Today Daily Change % -0.07
Today daily open 1961.81
 
Trends
Daily SMA20 1977.94
Daily SMA50 1991.08
Daily SMA100 1939.51
Daily SMA200 1836.8
 
Levels
Previous Daily High 1964.07
Previous Daily Low 1938.15
Previous Weekly High 1983.5
Previous Weekly Low 1932.12
Previous Monthly High 2079.76
Previous Monthly Low 1932.12
Daily Fibonacci 38.2% 1954.17
Daily Fibonacci 61.8% 1948.05
Daily Pivot Point S1 1945.28
Daily Pivot Point S2 1928.76
Daily Pivot Point S3 1919.36
Daily Pivot Point R1 1971.2
Daily Pivot Point R2 1980.6
Daily Pivot Point R3 1997.12

 

 

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content


Recommended content

Editors’ Picks

EUR/USD stays vulnerable near 1.0600 ahead of US inflation data

EUR/USD stays vulnerable near 1.0600 ahead of US inflation data

EUR/USD remains under pressure near 1.0600 in European trading on Wednesday. The pair faces headwinds from the US Dollar upsurge, Germany's political instability and a cautiou market mood, as traders look to US CPI data and Fedspeak for fresh directives. 

EUR/USD News
GBP/USD trades with caution below 1.2750, awaits BoE Mann, US CPI

GBP/USD trades with caution below 1.2750, awaits BoE Mann, US CPI

GBP/USD trades with caution below 1.2750 in the European session on Wednesday, holding its losing streak. Traders turn risk-averse and refrain from placing fresh bets on the pair ahead of BoE policymaker Mann's speech and US CPI data. 

GBP/USD News
Gold price holds above $2,600 mark, bulls seem non committed ahead of US CPI

Gold price holds above $2,600 mark, bulls seem non committed ahead of US CPI

Gold price staged a modest recovery from a nearly two-month low touched on Tuesday. Elevated US bond yields and bullish USD cap gains for the non-yielding XAU/USD. Traders now look forward to the key US Consumer Price Index report a fresh impetus. 

Gold News
US CPI data set to confirm inflation ramped up in October as traders pare back Fed rate cut bets

US CPI data set to confirm inflation ramped up in October as traders pare back Fed rate cut bets

As measured by the CPI, inflation in the US is expected to increase at an annual rate of 2.6% in October, a tad higher than the 2.4% growth reported in September. The core annual CPI inflation, excluding volatile food and energy prices, will likely remain at 3.3% in the same period.

Read more
Forex: Trump 2.0 – A high-stakes economic rollercoaster for global markets

Forex: Trump 2.0 – A high-stakes economic rollercoaster for global markets

The "Trump trade" is back in full force, shaking up global markets in the aftermath of the November 5th U.S. election. This resurgence has led to substantial shifts in both currency and bond markets, with the U.S. dollar index (DXY) jumping 2.0% + since election day.

Read more
Best Forex Brokers with Low Spreads

Best Forex Brokers with Low Spreads

VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.

Read More

Forex MAJORS

Cryptocurrencies

Signatures