- Gold price oscillates in a narrow band and is influenced by a combination of diverging factors.
- The emergence of fresh US Dollar selling is seen as a key factor lending support to the XAU/USD.
- Bets for another 25 bps rate hike by the Federal Reserve in May act as a headwind for the metal.
Gold price struggles to capitalize on its gains recorded over the past two sessions and seesaws between tepid gains/minor losses on Wednesday. The XAU/USD holds steady around the $2,000 psychological mark through the first half of the European session and is influenced by a combination of diverging forces.
Fresh US Dollar selling lends support to Gold price
The US Dollar (USD) comes under renewed selling pressure and erodes a major part of the overnight gains amid the uncertainty over the Federal Reserve’s (Fed) rate-hike path. This, in turn, is seen lending support to the US Dollar-denominated Gold prices. Fresh concerns about the regional banking sector crisis, the possibility of an imminent recession and worries about the debt ceiling in the United States (US) lift bets for an imminent rate cut by the Fed later this year. This led to the overnight slum in the US Treasury bond yields and continues to act as a headwind for the Greenback.
Federal Reserve rate hike bets cap XAU/USD
It is worth recalling that the yield on the benchmark 10-year Treasury yields registered its largest decline since March. That said, the US central bank is still expected to deliver a 25 bps rate hike at the next Federal Open Market Committee (FOMC) monetary policy meeting in May. This, in turn, allows the US bond yields to stage a modest recovery on Wednesday and keeps a lid on any meaningful upside for the non-yielding Gold price. Apart from this, signs of stability in the equity markets further contribute to caping gains for the safe-haven precious metal, at least for the time being.
Traders now eye macro data from United States for fresh impetus
The aforementioned fundamental backdrop makes it prudent to wait for strong follow-through buying before confirming that the Gold price has formed a near-term bottom around the $1,970 area and positioning for any further gains. Market participants now look forward to the US economic docket, featuring the release of the Durable Goods Orders data later during the early North American session. This, along with the US bond yields, might influence the USD price dynamics. Apart from this, the broader risk sentiment might provide some impetus to the Gold price.
Focus remains on US Q1 GDP and US PCE Price Index
The focus, however, remains glued to the release of the first-quarter US Gross domestic product (GDP) report on Thursday. This will be followed by the US Core Personal Consumption Expenditure (PCE) Price Index – the Fed’s preferred inflation gauge – on Friday, which will help determine the near-term trajectory for the Greenback and the Gold price. In the meantime, the XAU/USD is more likely to extend its sideways consolidative price moves and remain confined in a familiar trading band held over the past one-and-half-weeks or so.
Gold price technical outlook
From a technical perspective, any subsequent move up is likely to confront stiff resistance near the $2,010 area. A sustained move beyond might trigger a fresh bout of a short-covering and lift Gold price beyond the $2,020 hurdle, towards the $2,040 horizontal zone en route to the YTD peak, around the $2,047-$2,049 region.
On the flip side, the $1,980 level, followed by the $1,969 region might continue to act as immediate support levels. Some follow-through selling will be seen as a fresh trigger for bearish traders and drag Gold price towards the next relevant support near the $1,956-$1,955 area. The XAU/USD could eventually drop to the monthly low around the $1,950 region.