Since the start of trading this week, the XAU/USD gold price has been subject to profit-taking sales, after testing the $2048 resistance level, and the bulls failed to achieve more. The recent sales of gold moved prices towards the $1970 support level, before the XAU/USD gold price stabilized around $1995 an ounce at the time of writing.
All in all, XAU/USD gold prices fell below the key $2000 level as US bond yields surged, with investors turning skeptical about potential interest rate cuts later this year. Commenting on the performance, Philip Stripel, senior market analyst at Blue Line Futures in Chicago, explained to Reuters: “Once the price of gold broke through the $2,000 mark, there were a lot of stop-loss orders that were triggered.” He added, “Anytime you get a dividend, you get a lot of people chasing individual stocks, and that could also result in them not investing as much in metals.”
Meanwhile, the price of the US dollar strengthened, supported by the rise in yields to the highest level in nearly one month. Financial markets are now pricing in an 85% chance of a 25 basis point rate hike at the May 2-3 Fed meeting, according to CME's FedWatch tool.
Louis Federal Reserve Chairman James Bullard said on Tuesday that the Fed should continue to raise interest rates as recent data shows that inflation is continuing while the broader economy appears poised to continue growing, even if it is slow. Commenting on this, Ole Hansen, commodities analyst at Saxo Bank, said the correction was due to markets readjusting their expectations about the path of the Fed's interest rate hike, but gold's rally was only delayed.
Elsewhere, US stocks fell as investors assessed another batch of corporate earnings and remained focused on any signals about the Fed's next steps. Therefore, the S&P 500 halted its advance for two days. Morgan Stanley stock fell after reporting a 20 percent drop in net income amid a slowdown in investment banking. Western Alliance Bancorp jumped after beating earnings estimates and said deposits had recovered. Shares of Tesla Inc. fell. After the automaker slashed prices again ahead of its results later in the day. Bed Bath & Beyond Inc. The basis for filing for bankruptcy following the retailer's recent cash-raising efforts.
The two-year Treasury yields, which are more sensitive to impending policy moves, rose for the fifth consecutive session and topped 4.2 percent. Meanwhile, Bitcoin price has fallen back below the closely watched level of $30,000 amid a broader decline in the cryptocurrency market. The oil price fell on concern that slower economic growth due to tightening monetary policy could further slow the uneven recovery in demand.
XAU/USD gold price forecast today:
- The return of stability in the XAU/USD gold price above the psychological resistance at $2000 an ounce may give the bulls an opportunity to return to the upside again.
- It will require moving towards the $2035 resistance level to return the luster of the rise to the price of gold, then expect more peaks.
- The continued recovery of the US dollar may increase the selling pressure on gold, and thus expect a move towards the support levels of 1970 and 1948 dollars, respectively.
- The last level is sufficient to confirm the start of the bearish shift in the direction of gold.
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