- Gold price regains momentum above $1,900 despite increasing Fed rate hike odds.
- US economic data underscores solid growth, pushing XAU/USD to test the 200 day EMA.
- Treasury yields soar, underpinning projections for rate hikes and possible headwinds for gold demand.
The price of Gold recovers some ground after dipping below the $1,900 figure for the first time since March 15, 2023, gains around 0.09%, after upbeat economic data from the United States (US) Speculations will increase that the Federal Reserve (Fed) will proceed with additional rate hikes. In addition, the data countered prospects for a “hard landing” as the economy posted a strong pace of growth. The XAU/USD pair is trading at $1,909.65, after hitting a daily low of $1,893.17.
US economic data signals further Fed tightening; XAU/USD bulls hold out
The US economic calendar revealed outstanding figures for the US economy. The Gross Domestic Product (GDP) for the first quarter was revised upwards from 1.3% to 2%, while employment data reflected the strength of the labor market. Initial jobless claims for the week ending June 24 stood at 239,000, well below estimates of 265,000, thus breaking three weeks of readings above the 260,000 signal.
The data demonstrates the good health of the US economy. Following these figures, gold traders, among other market participants, began to assess the additional tightening needed by the US Federal Reserve (Fed), which will increase rates in July by a quarter of a percentage point. CME’s FedWatch tool shows 0.25% upside odds of 87%, while US Treasury yields reached levels not seen since March 15.
The 10-year US Treasury yield has risen to 3.854%, up 14.4 basis points, while the US real yield, a headwind for XAU/USD prices, stands at 1.678%, its highest level since March 9.
Other data showed that pending home sales fell to their lowest level in five months in May, at -22.2% yoy, worse than April’s -20% contraction.
Earlier, US Federal Reserve Chairman Jerome Powell said the job market remains tight, inflation too high, and expressed the Fed’s “long way to go” before inflation picks up again. his 2% target. Powell noted that the majority of the Federal Reserve’s Open Market Committee (FOMC) expects “two or more” rate hikes by the end of the year.
Analysts quoted by Bloomberg commented that “today’s data showed that rates will be higher for longer.” The yield on 2-year US Treasury bonds, the most sensitive to monetary policy decisions, jumped to 4,893%. Money market futures for the November meeting showed a 34% chance of a rate hike to the 5.50-5.75% range, as traders begin to believe that the Fed will continue to increase borrowing costs, as It is observed in the last dot plot.
Against this background, the outlook for XAU/USD is skewed slightly lower, although gold bulls bought the dip to the 200 day EMA at $1,895.86. However, additional positive US data showing a strong economy could suggest higher rates and therefore lower demand for the yellow metal.
XAU/USD Price Analysis: Technical Perspective
XAU/USD remains neutral to the downside, despite bouncing off the 200 day EMA. The Relative Strength Index (RSI) continues to point lower, while the 3-Day Rate of Change (RoC) shows that sellers remain in command. Unless XAU/USD buyers recapture the May 30 daily low of $1,932.20, which turned into resistance, the outperforming metal would be subject to further selling pressure. If XAU/USD buyers recapture this latest low, next resistance would be the intersection of the 20 and 50 day EMAs around $1,936. On the other hand, a daily close for XAU/USD below $1,900 could pave the way for further losses below the 200 day EMA with the psychological $1,850 level as first support, followed by the 1,800 figure. $.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
