- The price of gold reversed an intraday decline to the $1,845 area amid prevailing caution.
- Expectations of more aggressive central banks and a stronger dollar should cap gains.
- Market attention remains focused on Thursday’s ECB meeting and Friday’s US CPI.
the price of gold failed to capitalize on the previous day’s strong bounce from the $1,837 area – levels just below the important 200-day SMA – and turned lower on Wednesday. However, the initial drop was bought near the $1,845 area amid a cautious environment that tends to benefit the traditional haven precious metal. XAU/USD last traded just above the $1,850 level, almost unchanged for the day in the American session.
Gold price benefits from worsening global economic outlook
Market sentiment remains fragile amid concerns that more aggressive action by major central banks to curb inflation could challenge global economic growth. In addition, the World Bank on Tuesday cut its global growth forecast for 2022 to 2.9% and moderated investor appetite for riskier assets. This was highlighted by a generally weaker tone around equity markets, which could fuel some safe-haven flows into XAU/USD. Despite supportive factors, significant rallies still look unlikely, warranting caution before making aggressive bullish bets.
Bets on rising rates and strengthening of the dollar limit the price of gold
Investors remain concerned that the global supply chain disruption caused by the Russian-Ukrainian war could drive consumer prices higher. This could force the Federal Reserve to tighten monetary policy at a faster pace, which, in turn, could trigger a further rise in US Treasury yields. Indeed, benchmark 10-year US government bond yields have soared above the 3% threshold and have helped revive demand for dollars. The European Central Bank (ECB) is also expected to join its global counterparts in raising interest rates to curb inflation. This could help cap the yellow metal’s performance ahead of Thursday’s key ECB monetary policy meeting and Friday’s US consumer inflation figures.
Central banks remain concerned about rising inflation
Rising inflation fuels rate hike bets
FXStreet analyst Yohay Elam noted that soon-to-be-released US consumer price index (CPI) data “shows signs that price pressures are easing.” “Most importantly, wages advanced just 0.3% in both April and May, a total of 0.6%, while expectations imply a cumulative gain of 1.1% in the core CPI. This mismatch cannot be ruled out, but it seems unlikely”. Should inflation numbers come in softer than expected, investors could see this as a breakthrough that allows the Fed to pause rate hikes in September. In that case, US Treasury yields could pull back and help gold gain traction.
Gold Price Technical Outlook
The price of gold has so far managed to defend a technically significant support of the 200-day SMA, which is currently pegged near the $1,842-$1,841 region. This zone should now act as a pivot point, which if broken decisively it could drag XAUUSD towards the intermediate support of $1,830 on the way to the $1,810-1,808 and $1,800 zone.
On the other hand, the push beyond the $1,857 region is likely to face resistance near the $1,870 supply zone. Sustained strength beyond that would negate any short-term bearish bias and lift XAUUSD to the next relevant hurdle near the $1,885-$1,886 zone. The momentum could extend further and allow the bulls to reclaim the $1,900 level for the first time since early May.
Source: Fx Street

With 6 years of experience, I bring to the table captivating and informative writing in the world news category. My expertise covers a range of industries, including tourism, technology, forex and stocks. From brief social media posts to in-depth articles, I am dedicated to creating compelling content for various platforms.