- XAU/USD is facing slight losses in the $1,960 zone, but is poised for a weekly rally.
- Expectations of a pause in the Fed rate hike and fragile market sentiment will act as tailwinds for the gold price.
- Investors are watching the FOMC meeting and its future guidance.
He XAU/USD it is seeing slight losses around the $1,960 area, but remains poised for a weekly rally. However, expectations of a pause in rate hikes by the Federal Reserve act as a tailwind for Gold, while rising US bond yields limit its upside potential.
Focus on US data and next week’s FOMC meeting
Expectations that the Federal Reserve (Fed) will refrain from raising interest rates during its next meeting on June 13-14 are holding back USD bulls from making aggressive bets and thus weakening the Dollar. . However, recent unexpected rate hikes by central banks point to further tightening, which could limit the yellow metal’s upside potential. Markets are pricing in a high probability of a Fed rate hike in July, with the chances around 85%. Furthermore, the probability of a rate cut by the end of the year has decreased from 50% earlier in the week to around 15%.
US bond yields rose on Friday. The 10-year Treasury bond yield operates at 3.75%, while the 2- and 5-year yields stand at 4.60% and 3.92%. As US bond yields could be seen as the opportunity cost of holding the yellow metal, rising yields weighed on gold.
On the other hand, expectations of a global recession after the figures of the Chinese consumer price index (CPI) worsened the market sentiment. China’s CPI contracted 0.2% in May, while the producer price index (PPI) experienced its biggest contraction since February 2016, falling 4.6% year-on-year and pointing to a slowdown in economic activity.
XAU/USD levels to watch
According to the daily chart, the technical outlook for XAU/USD remains neutral to bearish. The 20-day and 100-day SMAs seem to be converging towards the $1,950 area for a bearish crossover. In that case, more bearish moves could come into play.
On the downside, the next support levels to watch are the aforementioned $1,950 level, followed by the 100-day SMA at $1,940 and the $1,920 area. Conversely, the 20-day SMA at $1,965 is key for gold to gain more traction. If broken above, the price could see a steeper move towards the $1,980 area and then the key psychological $2,000 level.
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.
