- Gold price oscillates in a narrow trading band just below the weekly high of $1,970.
- The rebound in US bond yields revives demand for the dollar and acts as a headwind.
- Economic woes and bets on an imminent pause in the Fed’s rate hikes help limit the downside.
Gold price is struggling to capitalize on the previous day’s strong rebound from the 100-day SMA support near the $1,940-1,939 zone and ranges in a narrow trading band on Friday. XAU/USD is currently trading near the upper end of its weekly range around the $1,965 area, virtually unchanged today heading into the European session.
The reactivation of the demand for the Dollar limits the rises in the price of Gold
A modest rebound in the United States (US) government bond yield helps the dollar attract some late-week buying and recoup some of yesterday’s slide to 103.29, its lowest level. low since May 24. This, in turn, is seen as a key factor acting as a headwind for the gold price. However, the downside is dampened by a generally softer risk tone, which tends to benefit XAU/USD , safe haven.
Softer risk tone supports XAU/USD as a safe haven
Market sentiment remains fragile on growing concerns about a global economic downturn, fueled by today’s Chinese inflation figures. Indeed, the National Bureau of Statistics reported that China’s Consumer Price Index (CPI) rose 0.2% year-on-year in May from 0.1% previously and 0.3% forecast. For its part, the Producer Price Index (IPP) recorded its worst drop since February 2016, falling 4.6% year-on-year. This further points to a slowdown in the post-COVID recovery in the world’s second-largest economy.
The Fed’s rate hike pause also acts as a tailwind for the gold price
On top of this, increasingly firm expectations that the Federal Reserve (Fed) will not raise interest rates at its June 13-14 meeting deter USD bulls from making aggressive bets and lend support to the Gold price. In fact, markets have fully priced in an imminent pause in the US central bank’s rate hike cycle. Bets were bolstered by US data on Thursday, which showed initial claims for jobless benefits last week reached their highest level in 20 months.
Attention remains focused on next week’s crucial FOMC meeting
However, Fed funds futures point to the possibility of a further 25 basis point (bp) hike at the July meeting of the Federal Open Market Committee (FOMC). This, in turn, is preventing traders from making aggressive bullish bets on the price of gold, in the absence of relevant economic data to move the market. Furthermore, investors would prefer to stay on the sidelines ahead of the release of the latest US consumer inflation figures and the FOMC meeting next week.
Gold Price Technical Outlook
From a technical point of view, some follow-through buying has the potential to push the gold price to the next relevant hurdle near the 1.983-supply zone.$1,985on the way to the psychological zone of the $2,000. XAU/USD could rally towards the resistance located at $2,010-2,012.
On the other hand, the 100-day SMA, currently around the $1,939, could continue to protect the immediate fall. A convincing break below will make the gold price vulnerable to accelerating the decline towards support. $1,900. A little bit of follow through selling should allow the bears to target the very important 200 day SMA, currently around the $1,839with some intermediate support near the horizontal zone of $1,876-$1,875.
XAU/USD Key Levels
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
