Gold Price Forecast: XAU/USD bulls flex muscles ahead of Fed Minutes, $1,950 eyed
- Gold Price grinds higher after four-day winning streak, bearish channel tests upside bias.
- Firmer United States Treasury bond yields, hawkish Federal Reserve bets fail to provide tailwind to US Dollar amid mixed data.
- Recession woes, US-China jitters challenge XAU/USD bulls amid full markets.
- Dovish Fed Minutes can propel Gold Price towards $1,950 resistance.
Gold Price (XAU/USD) lacks upside momentum after posting a four-day winning streak, making rounds to $1,925 during early Wednesday in Asia. In doing so, the XAU/USD takes clues from the latest challenges to sentiment, emanating from fears of a trade war between the United States and China, as well as the concerns surrounding the global recession. It’s worth noting, however, that the US Dollar’s struggle to keep the buyer’s on the table, mainly due to the downbeat data, puts a floor under the Gold Price.
Gold Price benefits from jittery markets, US Dollar’s struggle
Gold Price stays on the way to posting the first weekly gain in four, despite the latest inaction, as the market’s fears of economic slowdown, higher interest rates and the tension between the United States and China weigh on the sentiment. In doing so, the XAU/USD fails to justify the mildly bid US Dollar as the US statistics have been softer of late.
The fears of recession gain momentum as most central banks defend restrictive monetary policies even as the latest statistics from the top-tier economies haven’t been impressive. It should be noted that the US yield curve inversion also flagged fears of an economic slowdown earlier in the week.
“The yield curve briefly inverted to 42-year lows Monday as investors increasingly expect the Fed to raise its benchmark borrowing rates to keep inflation in check,” said Reuters. That said, the US two-year Treasury bond yields dropped to 4.85% while the 10-year counterpart fell to 3.78%, before ending Monday’s trading around 4.93% and 3.86% respectively.
Talking about the US data, US ISM Manufacturing PMI for June dropped to the lowest level in three years, as well as stayed below the 50.0 level for the seventh consecutive month, as it marked a 46.0 figure versus 47.2 expected and 46.9 prior. Further, S&P Global Manufacturing PMI for June confirmed 46.3 figures, the lowest in five months, whereas the Construction Spending improved 0.9% MoM for May, versus 0.5% expected and 0.4% previous readouts.
Also challenging the mood, as well as favoring the Gold Price, could be the latest US-China trade war. Fears of the US-China trade war escalate and weighs on the sentiment as China announced abrupt controls on exports of some gallium and germanium products, effective from August 1. The dragon nation’s latest retaliation is in reaction to the US curb on AI chips’ shipments to Beijing.
Previously, the Wall Street Journal (WSJ) added to the market’s fears about the Sino-American ties while saying, “The Biden administration is preparing to restrict Chinese companies’ access to U.S. cloud-computing services, according to people familiar with the situation, in a move that could further strain relations between the world’s economic superpowers.”
On the same line, China’s President Xi Jinping said in a virtual SCO summit on Tuesday that they “should focus on practical cooperation and accelerate economic recovery. The policymaker also added, “(They) Need to strengthen strategic communication and coordination, respect each other’s core interests and concerns.”
It should be observed that US Treasury Secretary Janet Yellen is in Beijing. Earlier on Tuesday, US Treasury Department said, per Reuters, “Treasury Secretary Janet Yellen had a ‘frank and productive’ discussion today with China’s Ambassador.” The news also mentioned that US Treasury Secretary Yellen raised issues of concern while also conveying the importance of the two countries working together.
While portraying the mood, the US Dollar printed a two-day winning streak before ending Tuesday’s North American session near 103.10 whereas the German Bunds rose while Euro Stoxx and FTSE 100 were both down with mild losses.
Looking ahead, China’s Caixin Services PMI for June will direct immediate XAU/USD moves ahead of the Federal Open Market Committee (FOMC) Minutes for the June meeting when the Fed policymakers announced a pause on the rate hike. Should the China PMI arrive as downbeat and the Fed policymakers fail to defend the hawkish bias, the Gold Price will have further upside to track.
Gold Price Technical analysis
Gold Price holds onto the previous week’s rebound from a multi-day low while staying within a descending trend channel comprising levels marked since late May.
It’s worth noting that the XAU/USD’s four-day-old winning streak gains support from the bullish Moving Average Convergence and Divergence (MACD) signals, which in turn suggests further advances of the metal.
Also acting as a bullish sign for the Gold buyers is the quote’s successful break of a two-month-old descending resistance line, now immediate support around $1,926.
It should be observed, however, that the Relative Strength Index (RSI) line, placed at 14, approaches the overbought territory, suggesting limited upside room for the Gold Price.
As a result, the 200-SMA and the stated bearish channel’s top line, close to $1,946 and $1,951 in that order.
Alternatively, an ascending support line from the last Thursday, near $1,918 by the press time, acts as immediate support to watch during the fresh Gold Price downside.
Following that, the aforementioned bearish channel’s bottom line surrounding the $1,900 round figure will be crucial to watch during the XAU/USD’s additional declines.
Gold Price: Four-hour chart
Trend: Limited upside expected