Gold Price recover modest intraday losses, upside potential seems limited

• Gold Price edged lower on Thursday and was pressured by more hawkish major central banks.
• But recession fears weighed on investors’ sentiment and limited losses for the safe-haven metal.
• Intraday USD selling revived demand for the XAUUSD, though the uptick lacked follow-through.

Gold Price struggled to capitalize on the previous day's goodish recovery move from a one-month low and came under some fresh selling pressure on Thursday. The XAUUSD remained depressed heading into the North American session, albeit managing to recover a major part of its intraday losses, and was last seen trading around the $1,830 region.

Gold Price weighed down by hawkish Central Banks

The Federal Reserve on Wednesday raised interest rates by 75 bps - the biggest hike since 1994 - and also indicated a faster policy tightening path to bring price pressures under control. In the post-meeting press conference, Fed Chair Jerome Powell reaffirmed the central bank will deliver another big hike in July. Moreover, the so-called dot plot showed that the median year-end projection for the federal funds rate moved up to 3.4% from 1.9% in the March estimate and 3.8% in 2023.

Also read: After Powell’s decision, the outlook for gold remains bearish

Adding to this, the Swiss National Bank surprised markets with a 50 bps rate hike this Thursday and also left the door open for further rate hikes to counter rising inflationary pressures. Separately, the Bank of England also decided to hike interest rates for the fifth consecutive time and said that it remains ready to act "forcefully" to curb soaring inflation. This, in turn, was seen as a key factor that continued acting as a headwind for the non-yielding yellow metal.

Gold bar

Risk-off mood offered support

The global risk sentiment took a hit amid doubts that major central banks can hike interest rates to curb inflation without impacting economic growth. Powell also projected a slowing economy and rising unemployment in the months to come amid concerns about the global supply chain disruptions caused by the Russia-Ukraine war and the latest COVID-19 lockdowns in China. The worsening global economic outlook tempered investors' appetite for riskier assets, which was evident from a sea of red across the equity markets. This, in turn, extended some support to the safe-haven precious metal.

Modest USD-selling helped limit losses

The US dollar struggled to preserve/capitalize on its intraday gains and witnessed some selling in reaction to disappointing US macro releases. The US Department of Labor reported that 229K individuals filed for unemployment insurance for the first time in the week ending June 11 and the previous week's reading was revised higher to 232K. Adding to this, data published by the US Department of Commerce revealed that Housing Starts in the US declined by 14.4% and Building Permits fell by 7% in May.

Furthermore, the Federal Reserve Bank of Philadelphia's Manufacturing Business Outlook Survey's diffusion index for current general activity declined to -3.3 in June from 2.5 in May. The data added to worries about softening US economic growth and weighed on the buck, which, in turn, helped the dollar-denominated commodity to attract some buying at lower levels. That said, the intraday uptick lacked bullish conviction, warranting some caution before positioning for any further gains.

Gold Price technical outlook

Gold Price on Wednesday faced rejection near a technically significant 200-day SMA. The said barrier is currently pegged near the $1,842 region and should act as a pivotal point for short-term traders. Sustained strength beyond might trigger a short-covering move and lift the XAUUSD towards the $1,870 supply zone. Some follow-through buying above the monthly peak, around the $1,879 region, would shift the bias in favour of bullish traders and set the stage for a move towards reclaiming the $1,900 round figure.

On the flip side, the daily swing low, around the $1,815 region, now seems to protect the immediate downside ahead of the $1,805 area, or a one-month trough touched on Tuesday. Failure to defend the said support levels, leading to a subsequent break below the $1,800 mark, would be seen as a fresh trigger for bearish traders and expose the YTD low, around the $1,780 region.

Bias remains bearish in the short term