Gold Price Forecast: XAU/USD eyes a sustained break above $1,980 amid chaos over Fed’s rate guidance

• Gold price is aiming for a sustained break above $1,980 as Fed policymakers are divided about June’s interest rate policy.
• Fed Harker and Jefferson advocated a pause in the policy-tightening spell while Fed Mester sees no reason for a pause.
• Gold price is gathering strength for breaking above the horizontal resistance at $1,984.25 after a downward-sloping trendline breakout.

Gold price (XAU/USD) has sensed marginal selling pressure after failing to sustain above the crucial resistance of $1,980.00 in the Asian session. The precious metal showed a solid upside on Thursday, capitalizing efficiently on a sell-off in the US Dollar Index (DXY).

S&P500 futures have added nominal gains in Asia. The risk-appetite theme is in action as US equities were heavily bought on Thursday after Federal Reserve (Fed) policymakers remained divided over their stance about interest rate guidance for June’s monetary policy meeting.

The US Dollar Index (DXY) was badly beaten after support for a pause in the rate-hiking spell from Fed policymakers. Philadelphia Federal Reserve Bank President Patrick Harker and Fed Governor Philip Jefferson favored a neutral interest rate policy and advised them to remain dependent on economic indicators. However, Cleveland Fed Bank President, Loretta Mester doesn’t see a compelling reason of pausing the policy-tightening regime.

It seems that confusion over interest rate action would ease sharply after the release of the United States Nonfarm Payrolls (NFP) data (May). Analysts at Wells Fargo expect NFP to increase by 200K. They believe it is important to keep a close eye on wage growth and the labor force participation numbers. The labor force has grown at a healthy pace over the past year, and a further deceleration in wages alongside expanding supply would be an encouraging sign in the Federal Reserve's fight to get inflation back to 2%.

Gold technical analysis

Gold price has delivered a breakout of the downward-sloping trendline plotted from an all-time high at $2,079.76 on a two-hour scale. The precious metal is gathering strength for breaking above the horizontal resistance plotted from May 19 high at $1,984.25.

A bull cross, represented by the 20-and 50-period Exponential Moving Averages (EMAs) at $1,954.70, advocates more upside ahead.

The Relative Strength Index (RSI) (14) has shifted into the bullish range of 60.00-80.00, which indicates that the upside momentum is active now.

Gold two-hour chart