- Gold price erases recovery gains after bulls run into resistance at the 21-day SMA.
- The US dollar starts the week on the defensive amid better risk sentiment.
- The United States celebrates the June Day holiday, leaving XAU/USD in limbo.
The price of Gold (XAU/USD) is trading virtually unchanged on the day around $1,840, reversing the bounce seen during the Asian session. The recovery in risk sentiment is negative for the safe-haven US dollar, which in turn limits the fall of the yellow metal.
Tighter liquidity conditions due to the June 19 US holiday also leave dollar bulls on edge, helping the precious metal find a bottom.
However, XAU/USD’s upside remains limited as investors remain cautious amid aggressive Fed tightening path. The Fed raised policy rates by 75 basis points last week and left the door open for a 75 basis point hike in July as the central bank remains committed to fighting inflation.
Meanwhile, the price of gold also lacks recovery momentum, as US inflation expectations, based on the 10-year inflation rate from the St. Louis Federal Reserve (FRED) data, hit new monthly lows below 2.60%. The yellow metal is often considered a hedge against inflation.
The markets are now focused on the testimony of the president of the ECB, Christine Lagarde, looking for new clues on monetary policy, which could have a significant impact on risk sentiment and could affect the dynamics of gold. The next thing to note for the yellow metal remains the Fed Chairman’s testimony, Jerome Powellwhich will occur later this week.
gold daily chart
Gold bulls failed to hold above the 200-day SMA and the 21-day SMA in $1,843 Y $1,848 respectively so far on Monday.
If the bulls manage to find acceptance above the latter, then the psychological level of $1,850 will be challenged. Next, the recent highs near $1,858 will test the commitment of the bassists.
The 14-day RSI remains listless below its midline, suggesting that the bullish attempts are likely to have limited strength.
To the downside, immediate support is likely to emerge at Friday’s low of $1,834below which XAU/USD bears will target the round level of $1,830.
Gold additional levels
Source: Fx Street
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