With the return of the strength of the US dollar, the markets confirmed that the US Federal Reserve is determined to continue raising US interest despite its halt at the last meeting. This brought the XAU / USD gold price strong losses that pushed it towards the support level of 1910 dollars per ounce, before closing trading last week, stable around the level of 1922 dollars per ounce. Gold price is heading towards deeper support levels, which paves the way for a round of stronger buying levels, and the start may be from the $1885 support level.
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The price of gold has now declined to trade several levels below the 100-hour moving average line. However, Friday's rebound helped XAU/USD gold price recover from the oversold levels of the 14-hour RSI and return to normal trading territory.
Economic Outlook
Gold is trading affected by the results of economic data, as the initial US unemployment claims came last week, contrary to expectations, at 260 thousand, with a count of 264 thousand. On the other hand, last week's continuing claims exceeded the expected toll at 1.782 million with the number of claims at 1.759 million. Elsewhere, the Chicago Fed National Activity Index missed the expected reading of 0 with a reading of -0.15, while US Existing Home Sales and Existing Home Sales topped out at 4.25M and -0.6% respectively with 4.3M and 0.2%.
US Building Approvals for the month of May beat the expected number of 1.423M with a count of 1.491M. Building Permits Change also beat expectations of -5% with a change of 5.2%. On the other hand, housing starts for the period exceeded the expected figure of 1.4 million with a figure of 1.631 million, while the change in housing starts exceeded the estimated change of -0.8% with a change of 21.7%.
Policymakers say the divergence of views between the market and the dot plot suggests that investors expect inflation to fall faster than the US central bank, which was concerned it was being overly optimistic after being slow to respond to higher prices. After months of strong consensus on the need to raise interest rates, officials are becoming more divided over the best course of action to quell inflation. Price pressures are easing but still more than double the Fed's target.
San Francisco Fed President Mary Daly told Reuters in an interview published later on Friday that two more US rate hikes this year was a "very reasonable" expectation. For her part, Fed Governor Michelle Bowman said Thursday that "further increases in interest rates will be necessary" to curb inflation, which remains unacceptably high. Richmond Fed President Thomas Barkin, also speaking on Thursday, said he would be "more than comfortable doing more" on rates if price pressures did not ease as expected.
Technical analysis of gold prices XAU / USD:
- In the near term and according to the performance of the hourly chart, it appears that the XAU/USD gold price is trading within a bearish channel formation.
- This indicates a significant short-term bearish bias in market sentiment.
- Therefore, the bears will target an extended decline at around $1,910 or lower at $1,902 an ounce.
- On the other hand, the bulls will target potential bounces around $1924 or higher at $1932.
On the long term and according to the performance on the daily chart, it appears that the XAU/USD gold price is trading within a bearish channel formation. This indicates a significant long-term bearish bias in market sentiment. Therefore, the bears will be looking to extend the current range of declines towards $1869 or lower to $1800 an ounce. On the other hand, the bulls will target long-term profits at around $1983 or higher at $2049 an ounce.
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