XAU/USD keeps bounce off $1,950 support confluence with eyes on Fed

• Gold Price edges higher following the first daily gain in five.
• Mixed United States data, risk-on mood lure XAU/USD buyers.
• China stimulus hopes, open market operations join unimpressive US statistics to prod US Dollar bulls.
• Federal Reserve Chairman Jerome Powell’s speech will be crucial for Gold buyers as 0.25% rate hike priced in.

Gold Price (XAU/USD) steadies around $1,965 as bulls and bears jostle during the early hours of the key data comprising the Federal Open Market Committee (FOMC) monetary policy meeting announcements. Also challenging the XAU/USD price could be the latest headlines testing the previous optimism about China. Furthermore, mixed data from the United States and the pre-Fed anxiety, as well as a light calendar in Asia, appear as extra carriers for the Gold price of late. Even so, the yellow metal defends the previous day’s corrective bounce off the lowest levels in a week by the press time.

Gold Price edges higher on cautious optimism ahead of Fed

Gold Price remains on a firmer footing despite the latest inaction as markets keep expecting a sooner end to the rate hike trajectory at the major central banks. Also favoring the sentiment, as well as the XAU/USD, could be the upbeat statements from China Communist Party’s Politburo meeting and China state planner National Development and Reform Commission (NDRC) suggesting more stimulus from Beijing.

Furthermore, the International Monetary Fund’s (IMF) upward revision to the global growth forecasts also favored the risk-on mood and the Gold Price.

On the other hand, the US Dollar’s failure to cheer mostly upbeat data on Tuesday, due to the downbeat PMIs and previously disappointing inflation and employment signals, also provides tailwinds to the Gold Price.

On Tuesday, US Conference Board (CB) Consumer Confidence jumped to 117.0 for July from 110.10 prior (revised) versus market forecasts of 112.10. The survey details unveiled that the one-year consumer inflation expectations edged lower to 5.7% while the Present Situation Index and  Consumer Expectations Index rose to 160.0 and 88.3 in that orders for the said month. That said, the US Housing Price Index for May reprinted the 0.7% MoM growth compared to analysts’ estimation of 0.2% whereas the S&P/Case-Shiller Home Price Indices also repeated the -1.7% YoY figures for the said month versus -2.2% expected.

Following the data, the US Dollar Index (DXY) regained upside momentum and rose to a fresh high in a fortnight, before positing the first daily loss in six. It should be noted that the upbeat prints of US S&P Global Manufacturing PMI for July favored the US Dollar to refresh a two-week high on Monday even as the Chine-inspired optimism weighed on the greenback during early Tuesday. Apart from the US data, Reuters’ news stating China state banks’ defense of the Yuan (CNY), by selling the US Dollar, also seemed to have weighed on the US Dollar and propelled the Gold Price.

It’s worth noting that the latest headlines suggest fresh US-China tension, due to the US Senate’s passage of an amendment requiring US companies to report investment in China technologies like semiconductors and artificial intelligence (AI).

Furthermore, the US Federal Reserve (Fed) isn’t known for its bearish view and hence fears that Fed Chair Jerome Powell will do whatever it takes to sound hawkish also prod the sentiment and the Gold price.

Against this backdrop, S&P500 Futures print mild losses even as Wall Street benchmarks closed on the positive side for the second consecutive day. That said, the US 10-year Treasury bond yields rose to the highest levels in three weeks before ending Tuesday’s trading near 3.89%.

Looking ahead, the talks of the US central bank’s 0.25% rate hike are loud and clear and hence the same won’t affect the US Dollar Index much. As a result, comments from Fed Chairman Jerome Powell will be crucial to watch for clear directions.

Also read: Gold Price Forecast: XAU/USD quietly awaits crucial news around $1,960

Gold Price Technical Analysis

Gold Price recovers from a convergence of the 50 and 21 Exponential Moving Averages (EMAs) on the daily formation, around $1,950 by the press time.

Adding strength to the XAU/USD recovery are the bullish signals from the Moving Average Convergence and Divergence (MACD) indicator, as well as upbeat prints of the Relative Strength Index (RSI) line placed at 14.

With this, the Gold Price is likely to stretch the latest rebound towards the early June swing high of around $1,973. However, a slew of tops marked since mid-May, around $1,983-86, appears a tough nut to crack for the XAU/USD bulls.

Following that, the 61.8% Fibonacci retracement of the May-June downside, near $2,010, may test the Gold buyers past $1,986.

Meanwhile, a daily closing beneath the $1,950 support confluence needs validation from a one-month-old rising support line, close to $1,943 at the latest.

In a case where the Gold Price remains bearish past $1,943, multiple supports near $1,910 and $1,900 may test the XAU/USD bears before directing them to the previous monthly low of around $1,893.

Overall, Gold price is likely to witness further recovery but the upside room appears limited.

Gold Price: Daily chart

Trend: Further recovery expected