Gold Price Forecast: XAU/USD steady while US Dollar strengthens amidst closed US markets

• Gold price slips amid closed US markets and rising bond yields.
• US Dollar gains momentum ahead of potential July Fed rate hike.
• US-China diplomacy progresses; US housing index outperforms expectations.

Gold price trades with minimal losses amidst a quiet US session due to a holiday in the United States (US). Therefore as US markets are closed, thin liquidity conditions drive price action. At the time of writing, XAU/USD is trading at $1952.52 after hitting a daily high of $1958.73.

Investors focus on yield performance and housing data while US-China diplomatic relations warm-up

European equities are trading negatively following a week that witnessed three major central banks delivering monetary policy decisions. The Federal Reserve (Fed) kept rates unchanged but foresaw peak rates at 5.6%, according to the dot-plot in the Summary of Economic Projections (SEP). Since then, officials have expressed the likelihood of raising rates at the July meeting, but the recent rally in US stocks portrays investors are not “buying” a more aggressive Fed.

As US markets remain closed, XAU/USD trading is dictated by yield performance on last Friday’s session. The 10-year benchmark note rate sits at 3.767%, while US real yields, calculated with the nominal yield minus inflation expectations, sit at 1.547%, still below the 2023 high of 1.719%. With US bond yields remaining higher, XAU/USD would likely remain pressured, as high yields, usually mean a stronger US Dollar (USD).

The US Dollar Index (DXY), a measure of the buck’s value against a basket of peers, climbs 0.13% at 102.436.

In the weekend events, US-China talks resumed as the US Secretary of State Anthony Blinken met with its counterpart, the Chinese Foreign Minister Qin, in Beijing. Blinken emphasized the importance of diplomacy and maintaining open channels with China as he invited Qin to Washington. Meanwhile, Qin commented that China is committed to building a stable, predictable, and constructive relationship with the US while maintaining its stance on Taiwan.

Regarding US data, the US NAHB Housing Market Index for June improved from 50 to 55, smashing estimates and, according to the report, the highest reading since July 2022. The report highlighted solid demand and the lack of inventory as the main reasons for the surprising jump.

Upcoming events

The US economic agenda will reveal additional housing data, the US Federal Reserve Chair Jerome Powell’s testimony at the US Congress, and a solid Fed parade, ready to rock the markets.

XAU/USD Price Analysis: Technical outlook

XAU/USD is trading sideways, in an area “vigilant” by the 20 and the 100-day Exponential Moving Averages (EMAs), at $1959.99 and  $1939.79, respectively. Even though XAU/USD broke below a symmetrical triangle on a downtrend, it recovered lost territory and negated the pattern. Nevertheless, XAU/USD is trading in a descending channel, while the Relative Strength Index (RSI) and the three-day Rate of Change (RoC) suggest sellers remain in charge. XAU/USD’s first support would be the 100-day EMA at $1939.79. Break below will expose additional support areas, like the June 15 low of $1925.06, ahead of the $1900 figure. On the other hand, XAU/USD’s first resistance would be the 20-day EMA at $1959.95, closely followed by the 50-day EMA at $1964.76, ahead of the top trendline of the descending channel at around $1970-80.