Gold Price eyes to retest $1,850 as risk aversion propels USD ahead of Fed

• Gold eases from five-week high to consolidate the biggest daily jump in a month.
• DXY renews monthly top as US CPI underpin hawkish Fed bets, China-linked headlines add to the risk-off mood.
• Growth, recession fears highlight central bank moves as the key catalysts for this week, FOMC in focus.

Gold Price (XAUUSD) retreats from a three-week-old resistance line as risk-aversion underpins the US dollar’s safe-haven demand. That said, the yellow metal’s latest weakness could be linked to the jump in the hawkish Fed bets, as well as China’s covid woes and the technical analysis. However, the bears await more updates on the key catalysts, while also waiting for the Fed’s verdict, to determine short-term XAUUSD moves.

Gold Price struggles to cheer DXY pullback

US Dollar Index (DXY) dribbles around a one-month high, retreating to 104.42 after refreshing the monthly top by the press time, as the US inflation data bolstered expectations of faster/heavier rate hikes by the Fed. However, the market’s indecision tests greenback buyers amid a sluggish Asian session.

Also read: Gold Price Forecast: 50 DMA could be a tough nut to crack, as focus shifts to Fed

Inflation woes weigh on XAUUSD

The headline US inflation, 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. A jump in the US inflation numbers propel the US Fed policymakers toward aggressive monetary policy action and weigh on Gold Price.

China’s covid conditions, Sino-American tussles test gold’s recovery

China witnesses fresh covid woes, led by Beijing and Shanghai and weigh on gold prices. “Beijing Sports Authority suspends offline sports events starting from June 13 due to covid,” said Reuters. During the weekend, Beijing’s local government spokesman Xu Heijian mentioned that a covid outbreak linked to a bar in Beijing is ferocious. Shanghai is on the same line as it reintroduced some activity restrictions after witnessing a jump in the virus numbers.

Elsewhere, comments from China’s Defense Minister Wei Fenghe highlight Sino-American jitters. China’s Wei mentioned that China's relationship with the US is at a crossroads. The policymaker also added that they will fight to the end if anyone attempts to secede Taiwan from China. “those who seek Taiwan independence will come to no good end,” said China’s Wei.

Treasury yields keep gold prices pressured

US 10-year Treasury bond yields poke the four-year high marked in May, up 1.7 basis points (bps) to 3.17% by the press time. In doing so, the benchmark bond coupon remains firmer for the fourth consecutive day amid growing fears of the Fed’s faster/heavier rate hikes. It should be noted that the global economic woes also underpin the US Treasury yields and weigh on the XAUUSD.

All eyes on Fed

Federal Reserve building in Washington DC.

US Federal Reserve (Fed) is up for 50 basis points (bps) of a rate hike during June 15 monetary policy meeting. However, the CME FedWatch tool shows the 26.8% chance of a 75 bp rate hike move, which in turn keeps the market in a dicey mode ahead of the key monetary policy meeting. Also important will be the policymakers’ view on rate hikes past August as the markets appear divided on the September action. Should the Fed hawks remain on the path of faster rate lifts, the Gold Price has more to crack on the downside. However, increased expectations of a 75 bps move on Wednesday challenge the gold bears ahead of the key event.

Gold Price technical outlook

Gold Price again fades bounce off the 200-DMA as it reverses from a three-week-old ascending resistance line by the press time.

RSI (14) retreat also hints at the metal’s further weakness even though the bullish MACD signals keep buyers hopeful until the quote stays beyond the 200-DMA support of $1,842.

Even if the quote drops below $1,842, multiple levels marked since mid-May, around $1,830-25, could challenge the XAUUSD bears.

Meanwhile, an upside clearance of the aforementioned resistance line, near $1,878 by the press time, isn’t an open invitation to the gold buyers as the 50-DMA level surrounding $1,883 adds to the resistance levels.

Even if the quote rises past $1,883, the 50% and 61.8% Fibonacci retracement (Fibo.) of the April 18 to May 16 downturn, around $1,893 and $1,917 in that order, will be challenging the XAUUSD’s advances.

Gold Analysis Forecast