• Gold price has witnessed a modest recovery on double bottom formation around $1,700.00.
• The upbeat Retail Sales and a minor recovery in Michigan CSI have failed to support the DXY.
• Fed’s Bullard sees interest rates to 3.75% by the end of 2022.

Gold Price (XAUUSD) has attempted an upside break of the consolidation in the early Tokyo session formed in a narrow range of $1,703.22-1,705.90 on Friday. The precious metal is displaying some signs of volatility expansion after a minor squeeze. The bright metal has defended the psychological support of $1,700.00 on Friday, which is also akin to Thursday’s low. A dual test of the psychological support of $1,700.00 has made the level more crucial for the market participants. At the press time, the precious metal is displaying exhaustion signals at lower levels but needs more filters to feature a bullish reversal.

The US dollar index (DXY) ended the week on a positive note despite some losses on Friday. On a weekly note, the asset continued with its winning streak. The DXY is posting gains consecutively for the past three weeks. Although the asset has displayed a steel fall on a lower timeframe, the upside remains warranted amid a broader strength in the DXY. The asset is auctioning in an inventory distribution phase at around 108.00 and a sideways move is highly expected.

Also Read: Gold Weekly Forecast: Upward correction could be in the books during Fed's blackout

Fed to elevate interest rates to 3.75% by 2022

Upbeat US Retail Sales didn’t support the DXY bulls

Gold price was expected to display a downside move below the psychological support of $1,700 on Friday despite the release of the robust US Retail Sales. As per the market consensus, the economic data landed at 1%, higher than the prior release of -0.3% and the estimates of 0.8%. Soaring price pressures amid costly fossil fuels and food products were expected to drive Retail Sales higher. Also, the Retails Sales data that excludes automobiles landed similarly at 1%, higher than the consensus and prior release of 0.6%. Despite, the upbeat Retail Sales, the DXY has failed to display recovery signals.

Improved Michigan CSI to delight Fed

Gold (XAUUSD) price remained on the backfoot after the release of the Consumer Sentiment Index (CSI) by the University of Michigan. The economic data was released at 51.1, minutely higher than the prior release of 50, and the expectations of 49.9. It is worth noting that the economic data was tumbling consecutively over the past two months. The higher inflation rate has been dampening the sentiment of the market participants. Consumers in the US were losing their confidence as higher price pressures had trimmed the value of their paychecks. A mild recovery in the sentiment data is expected to delight the Federal Reserve (Fed). However, the revival is not meaningful to strengthen the DXY.

Fed’s interest rates to escalate to 3.75% by 2022

Gold price to see more weakness going forward as Fed policymakers are hiking their interest rates target for 2022 vigorously. St. Louis Federal Reserve Bank President James Bullard said on Friday that he expects to see good employment reports through the second half of this year, as reported by Reuters. Fed’s Bullard doesn’t see a recession despite the economy seeing a slowdown in the trend pace of growth. Also, he stated that inflation will continue to surprise the market participants to the upside.

More rate hikes to bring a slump in real estate

There is no denying the fact that the impact of higher interest rate hikes by the Fed is majorly borne by the home buyers. Higher interest rates are going to impact the interest obligations for the investors channelizing their liquidity in the real estate. The impact will shift later gradually to durable goods as hopes of recession will continue to build if inflation is bound to surprise the market on the upside.

Gold technical analysis

Gold prices are displaying some signs of recovery amid the formation of Double Bottom on an hourly scale. The successful retest of Thursday’s low at $1,767.70 has brought a mild recovery in the gold prices, however, this doesn’t warrant a bullish reversal. The latter needs more filters to compel investors to start betting on the same.

The precious metal has surpassed the 20-period Exponential Moving Average (EMA) at $1,707.53, which signals an intermittent recovery. However, the 50-period EMA at $1,712.20 is still scaling lower.

The Relative Strength Index (RSI) (14) is oscillating in a 40.00-60.00 range which signals a consolidation ahead.

Gold hourly chart

Gold analysis (XAU/USD) forecast