- Gold Price probes bears at monthly low as US dollar pulls back before the FOMC.
- DXY traces US Treasury yields to ease from multi-year high as traders position for Fed.
- Hawkish Fed expectations, China’s covid woes keep sellers hopeful.
Gold Price (XAUUSD) fades the corrective pullback from a one-month low, retreating around $1,825 ahead of Tuesday’s European session, as market sentiment dwindles before the Federal Open Market Committee (FOMC). Even so, hawkish expectations from the Fed and pessimism surrounding China keep the gold sellers hopeful.
Gold Price stays bearish on hawkish Fed concerns
Hawkish Fed bets are on the spree after Friday’s hot inflation data from the US. That said, the US rate futures imply a 96% chance of the Fed raising rates by 75 bps at the June meeting, versus not more than 30% a few days back. The jump in the US Fed rate hike calls could also be witness in the CME’s FedWatch Toll as it backs a 50 bps move during Wednesday’s FOMC.
Also read: Gold Price Forecast: XAUUSD remains a ‘sell the bounce’ trade amid hawkish Fed bets
Yields retreat from multi-year high despite inflation woes
US Treasury yields while snapping a four-day uptrend near the multi-year high. That said, the benchmark US 10-year Treasury bond yields pare recent gains around 3.36%, down 1.1 basis points (bps) from the highest levels since April 2011, marked the previous day. The pullback in yields contradicts the recently firmer chatters surrounding the Fed’s 75 bps rate hike. On Friday, the headline US Consumer Price Index (CPI) rose to 8.6% YoY versus 8.3% expected while the Core CPI jumped 6.0% YoY compared to the expected drop to 5.9% from 6.2% a month earlier.
US-China jitters weigh on XAUUSD
US-China relations remain sour despite the Global Times (GT) news suggesting a positive development when the representatives of the US and China talked in Luxembourg. “Senior Chinese diplomat Yang Jiechi held talks with US National Security Advisor Sullivan in Luxembourg. The two agreed to reduce misunderstanding and miscalculation, and properly manage differences, saying it is necessary & beneficial to keep communication channels open,” said the GT. The latest reason for the Sino-American tussles could be linked to the US trade discussions with Taiwan and Beijing’s dislike for the same.
Beijing’s covid woes favor gold sellers
China’s status as a prominent gold buyer put the metal prices at risk of falling due to Beijing’s covid fears. Beijing covid cases hit a three-week high, per Bloomberg, which in turn propels the virus woes and the resulting economic fears that recently weighed on the risk barometer AUD/USD pair. “The city recorded 74 infections for Monday, the most since May 22, when Beijing saw a record number of cases for the current outbreak,” said Bloomberg.
Options market reprints bearish bias
Options market signals continue to tease the gold sellers, after snapping the two-week-old bearish bias by the end of Friday. That said, the daily risk reversal (RR), the spread between the calls and the puts, dropped the most since May 25 by the end of Monday’s North America trading session. As per the latest Reuters data for gold options, the RR prints -0.260 figures versus +0.285 the previous day.
Gold Price technical outlook
Gold Price takes clues from the RSI (14) while bouncing off a one-month low. The recovery moves, however, remain doubtful as to the support-turned-resistance zone from May 18, near $1,825-30, challenge the bulls. Also keeping the sellers hopeful are the bearish MACD signals.
Even if the yellow metal crosses the $1,830 hurdle, the 200-SMA and a three-week-old resistance line, respectively around $1,853 and $1,878, will challenge the XAUUSD buyers before giving them control.
Until then, the metal prices are likely to remain pressured towards the previous monthly low near $1,786, quickly followed by yearly bottom surrounding $1,780.
In a case where Gold Price remains bearish past $1,780, the odds of witnessing a slump towards the 61.8% Fibonacci Expansion (FE) of April-June moves, close to $1,745, can’t be ruled out
Gold higher on recession fears, indices open lower with a gap