XAU/USD bulls eye $1,985 as Fed policy pivot concerns weigh on US Dollar

• Gold Price braces for the biggest weekly gain since early April, poking monthly high of late.
• Downbeat United States inflation clues raise doubts on the Federal Reserve’s capacity to fuel interest rates past July.
• Mixed concerns about China, softer US Treasury bond yields add strength to XAU/USD upside.
• Michigan Consumer Sentiment Index, Inflation Expectations eyed for intraday Gold Price moves.

Gold Price (XAU/USD) remains sidelined around $1,960 amid an early Asian session on Friday, after refreshing the monthly high during the latest five-day winning streak. In doing so, the Gold Price justifies the recent hawkish comments from the Federal Reserve (Fed) officials to prod the XAU/USD bulls even as the previously downbeat United States inflation clues have drowned the US Dollar and have propelled the Gold Price. Additionally challenge the bullion buyers is the cautious mood ahead of the preliminary readings of July’s Michigan Consumer Sentiment Index, as well as the Five-Year Consumer Inflation Expectations.

Gold Price benefits from softer United States inflation clues

Gold Price braces for the biggest weekly gain in three months as the US Dollar bears the burden of the downbeat United States inflation clues. That said, the US Producer Price Index (PPI) came in as 0.1% YoY for June, versus 0.4% expected and 0.9% prior while the PPI ex Food & Energy, also known as the Core PPI, eased to 2.4% YoY from 2.8% previous reading and 2.6% market forecasts. Earlier in the week, a slump in the US Consumer Price Index (CPI) prod the Federal Reserve (Fed) hawks and drowned the US Dollar, which in turn propelled the XAU/USD price. That said, the US CPI dropped to 3.0% YoY figure for June versus 3.1% market forecasts and 4.0% reported for May. Further details suggest that the CPI ex Food & Energy, also known as the Core CPI, softened to 4.8% yearly for the said month compared to analysts’ estimations of 5.0% and 5.3% previous readings.

It should be noted, however, that the latest comments from Federal Reserve Governor Christopher Waller prod the Fed doves and challenge the Gold Price. “Fed likely to need two more 25 basis point rate hikes this year,” said Fed’s Waller in the prepared remarks for delivery before a gathering held by The Money Marketeers of New York University shared by Reuters.

Amid these plays, the US Dollar Index (DXY) licks its wounds near 99.75 after dropping to the lowest level since April 2022 the previous day, down 2.45% in a week so far. That said, the United States Treasury bond yields also slumped to the lowest level in two weeks and underpinned Wall Street’s run-up, as well as fuelled the Gold price.

Additionally, upbeat China trade numbers and the US-China updates are extra catalysts for the Gold Price. On Thursday, China’s trade surplus widened in both Chinese Yuan (CNY) and the US Dollar (USD) terms as the Imports dropped lesser than the Exports during June.

It should be noted that China’s Commerce Minister called on the US to lift “unilateral” sanctions against them in a statement on Thursday. The Ministry also asked the US to immediately stop what it called the unreasonable suppression of Chinese enterprises, suggesting turbulence in the Sino-US ties.

XAU/USD buyers await more US data to confirm Fed policy pivot

As the Federal Reserve (Fed) concerns are the key catalyst for the Gold Price, today’s preliminary readings of July’s Michigan Consumer Sentiment Index, as well as the Five-Year Consumer Inflation Expectations appear crucial for the XAU/USD traders to watch. Should the final clues of the US inflation appear downbeat, the XAU/USD may easily aim for the $1,985 hurdle. Apart from that, China-linked headlines and the US Treasury bond yields also become important for Gold traders to watch for clear directions.

Gold Price Technical Analysis

Gold Price justifies Wednesday’s upside break of a six-week-old resistance line by refreshing the monthly top, even as the XAU/USD bulls flirt with the peak of late.

That said, the overbought conditions of the Relative Strength Index (RSI) line, placed at 14, prod the immediate upside of the Gold Price around the 38.2% Fibonacci retracement of the May-June downturn, close to $1,965.

However, a convergence of the 50% Fibonacci retracement and multiple tops marked since May 19, around $1,985, appears a tough nut to crack for Gold buyers.

Following that, the 61.8% Fibonacci retracement level around $2,010, also known as the golden Fibonacci ratio, acts as the final defense of the XAU/USD bears.

On the contrary, the Gold Price pullback remains unimpressive unless staying beyond the resistance-turned-support line, around $1,942 by the press time.

In a case where the XAU/USD slides beneath the $1,942 resistance-turned-support, the $1,930 level can act as an intermediate halt for the bears to tackle before poking a fortnight-old rising support line, at $1,922 by the press time.

It’s worth noting that the Gold Price weakness past $1,922 will make the metal vulnerable to declining toward the previous monthly low of around $1,893.

Overall, the Gold price is likely to remain bullish but the upside room appears limited.

Gold Price: Four-hour chart

Trend: Limited upside expected