- Gold Price remains on the back foot for the third consecutive day, refreshes multi-day low.
- Bears cheer US dollar’s recovery amid hawkish Fed, firmer yields.
- US ADP, ISM Manufacturing PMI, Fedspeak eyed for fresh impulse.
Gold Price (XAU/USD) takes offers to refresh a fortnight low as bears keep reins during the third consecutive day amid a firmer US dollar. That said, precious metal remains pressured around $1,830 by the press time of pre-European session trading on Wednesday. It’s worth noting, however, that the cautious mood ahead of the key data/events seems to restrict the quote’s further downside.
DXY rebound keeps sellers hopeful
US Dollar Index (DXY) extends Tuesday’s recovery from the monthly low, up 0.26% intraday near 102.05 by the press time, as hawkish Fedspeak and mostly upbeat data recall the greenback buyers. Also underpinning the greenback could be the reassessment of market bets that previously doubted the Fed’s aggression post-September.
Also read: May is over, but worries are here to stay
US Federal Reserve (Fed)
While Fed Chair Jerome Powell didn’t express much during his meeting with US President Joe Biden, Fed Board of Governors member Christopher Waller and Atlanta Fed President Raphael Bostic were the latest hawks who renewed expectations of faster rate hikes. Fed’s Waller said, “Waller said that he supports lifting interest rates by another 50 bps at the next several Fed meetings and that the policy rate should be above neutral by the end of the year to reduce demand,” reported Reuters. On the same line, Fed’s Bostic crossed wires during an interview with MarketWatch as he said that his suggestion that the central bank takes a September “pause” in its push to raise interest rates should not be construed in any way as a “Fed put,” or belief that the central bank would come to the rescue of markets.
Not only the hawkish Fed but recently positive economics also favored the US dollar buyers, which in turn weighed on the XAUUSD prices of late. That said, the US Chicago Purchasing Managers’ Index and CB Consumer Confidence both rose past forecasts for May whereas the Dallas Fed Manufacturing Business Index dropped to the lowest levels in two years.
Additionally, US President Biden and Treasury Secretary Janet Yellen’s lauding of the Fed’s action and showing utmost interest in taming inflation also weigh on the Gold Price. “US Treasury Secretary Janet Yellen said on Tuesday that she was wrong in the past about the path inflation would take, but said taming price hikes is President Joe Biden's top priority and he supports the Federal Reserve's actions to achieve that,” said Reuters. It’s worth noting that US President also sounded harsh on Russia and exerted additional downside pressure on the bright metal. “If Russia does not pay a heavy price for its actions, it will send a message to other would-be aggressors that they too can seize territory and subjugate other countries,” said Biden per The New York Times.
To sum up, gold prices are likely to extend recent weakness amid multiple catalysts stated above. However, firmer prints of the US ISM Manufacturing PMI for May, expected 54.5 versus 55.4 prior, as well as hawkish Fedspeak, are awaited to forecast further downside of XAUUSD.
Gold Price technical analysis
Gold Price portrays a bearish moving average crossover as the 50-HMA pierces off the 200-HMA from above. However, the oversold RSI conditions and the 61.8% Fibonacci retracement of May 18-24 upside, around $1,830, test the metal sellers.
Even if the quote drops below $1,830, the mid-May swing high, near $1,825 can act as an intermediate halt before directing the XAUUSD prices towards the previous month’s bottom close to $1,786. However, the May 18 low near $1,807 and the $1,800 threshold may offer breathing space to sellers.
Alternatively, an immediate descending trend line surrounding $1,836 guards the bullion’s recovery moves ahead of the 200-HMA and the previous support line from May 18, respectively near $1,851 and $1,860.
Gold: Hourly chart
Trend: Limited downside expected