Market Analysis

Gold Price Nears Weekly Low Amid Fed Rate-Cut Uncertainty

Amos Simanungkalit · 26 Jun 2024138.2K Views

Gold prices (XAU/USD) continue to exhibit weakness for the second consecutive day on Wednesday, approaching the lowest levels seen in over a week. Recent hawkish comments from key Federal Reserve (Fed) officials indicate that the US central bank is unlikely to initiate a rate-cutting cycle soon, bolstered by a robust US economy. This scenario supports a moderate rise in US Treasury bond yields, providing a tailwind for the US Dollar (USD) and exerting pressure on the non-yielding yellow metal.

Conversely, weaker consumer and producer prices for May leave the possibility of a Fed rate cut in September open. Additionally, the potential for further geopolitical tensions in the Middle East and the ongoing Russia-Ukraine conflict offers some support to the safe-haven gold price, helping to limit its decline. Traders are likely to await key US macroeconomic data, including the final Q1 GDP print on Thursday and the Personal Consumption Expenditures (PCE) Price Index on Friday. These reports could influence the Fed's policy decisions and provide fresh directional impetus for XAU/USD.

Technical Analysis: Gold Price Maintains Position Above Ascending Trendline Support Near $2,310

From a technical standpoint, the recent inability to sustain gains beyond the 50-day Simple Moving Average (SMA) and the subsequent decline favor bearish traders. Additionally, daily chart oscillators have started to gain negative momentum again, suggesting that the path of least resistance for gold is downward. Nevertheless, it would be wise to wait for a decisive break below a short-term ascending trendline support, currently around the $2,310 area, before anticipating further losses. Should XAU/USD breach this support, it may weaken further below the $2,300 mark and retest the monthly swing low near the $2,287-$2,286 region. Continued selling pressure could confirm the negative bias and push prices towards the 100-day SMA support around the $2,250 area, with the downward trajectory potentially extending to the $2,225-$2,220 region before eventually reaching the $2,200 round figure.

On the upside, any significant positive movement is likely to encounter strong resistance near the 50-day SMA, currently around the $2,339-$2,340 region, followed by Friday's swing high around the $2,368-$2,369 zone. Sustained strength beyond this level could propel gold prices towards the $2,387-$2,388 intermediate hurdle, aiming for the $2,400 round figure. Further buying could negate the near-term negative bias, enabling XAU/USD to challenge the all-time high around the $2,450 area touched in May.