- Gold starts the week with losses close to 0.50%.
- US Treasury yields and an upbeat sentiment weigh on the yellow metal.
- Gold Price Forecast (XAU/USD): Neutral trend, although a daily close below the 200 DMA could open the door for further losses.
Gold (XAU/USD) is falling, weighed down by rising US Treasury yields and an upbeat mood as Federal Reserve officials begin their default period ahead of June’s monetary policy meeting. The XAU/USD reflects the above, in a critical week in terms of the US economic calendar, which reveals the May inflation figures.
US Treasury yields and bullish sentiment weigh on the yellow metal
Sentiment remains positive, thanks to China’s easing of coronavirus restrictions and an upbeat US jobs report on Friday, as reflected in global stocks posting gains. In addition, China’s services and composites PMI readings, while still in contraction territory, were better than expected.
Therefore, XAU/USD prices have been under pressure since the beginning of the session on Monday. Also, US Treasury yields have risen, led by the 10-year yield, which stands at 3,032%, up almost ten basis points, so the USD remains positive on the day. The dollar index rises 0.27% and stands at 102.448.
Meanwhile, the last Fed speaker for the week before, before the June meeting blackout, San Francisco Fed President Mary Daly said “I’m going to make it to that September meeting, and if I don’t I see convincing evidence (of lower inflation), so it could easily be a 50bp at that meeting as well. There is no reason we need to make that decision today, but my starting point will be whether we need to do another 50 or not.”
It sounded tougher than expected, as some Fed policymakers said the central bank might take a “pause” to assess economic conditions in September. For new Fed Vice Chair Lael Brainard, that’s not an option, as last Thursday she opposed it, saying “it’s very hard to see the case for a pause.”
Therefore, the Fed is headed for back-to-back 50 basis point rate hike meetings in June and July. September is open, and we could see the first split in rate hikes, some tipped towards 25 basis points and others staying at the 50 basis point pace, unless Fed Chairman Jerome Powell convinces the committee .
The US economic docket would feature April’s Trade Balance, Initial Jobless Claims, May’s Consumer Inflation Report and next week’s UoM Consumer Confidence.
Gold Price Forecast (XAU/USD): Technical Outlook
XAU/USD remains bullish, although it threatens to break below the 200-day moving average (DMA) at $1,841.82, which would open the door for further losses. Also, in bearish territory, the Relative Strength Index (RSI) is pointing lower but is far from reaching oversold conditions.
That said, the short-term XAU/USD path of least resistance is neutral. To the upside, the first resistance for XAU/USD would be the 200 DMA at $1,841.82. A break above would expose the June 6 high at $1,857.76, followed by the June 3 swing high at $1,874, away from the March lows turned resistance at $1,889.91. On the other hand, the first support for XAU/USD would be the June 1 low at $1,828.33. A break of the latter would expose the $1,800 level, followed by the May 16 cycle low at $1,786.50.
Technical levels
Source: Fx Street
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