Gold price gives up gains amid Fed’s hawkish remarks
NEWS | 05/29/2024 03:39:16 GMT | By Lallalit Srijandorn
Most recent article: Gold slumps on hawkish FOMC minutes, hurt rate cut hopes
Gold price edges lower on Wednesday on the modest USD recovery.
The Fed’s hawkish comments and stronger US data support USD, weighing on the precious metal.
Gold traders will focus on Fed’s Beige Book and member Williams’ speech later on Wednesday.
Gold price (XAU/USD) snaps the three-day winning streak on Wednesday amid the modest rebound of the Greenback. Additionally, the hawkish remarks from several Federal Reserve (Fed) officials and stronger-than-expected US economic data diminish expectations of the Fed rate cut in September. This, in turn, boosts the US Dollar (USD) and weighs on the USD-denominated gold price. On the other hand, geopolitical tensions and uncertainty could drive the safe-haven assets for gold. The growing demand from the central bank will continue to underpin higher gold prices in the near term.
Gold traders will keep an eye on the Fed’s Beige Book and the Fed’s John Williams speech on Wednesday. The release of the US Core Personal Consumption Expenditures Price Index (Core PCE) will take centre stage on Friday, which is estimated to show an increase of 0.3% MoM and 2.8% YoY in April. Any signs of stickier inflation in the US could trigger the possibility of delaying the Fed rate cut, exerting some selling pressure on the yellow metal as higher interest rates will increase gold's opportunity costs.
Daily Digest Market Movers: Gold price faces some pressure from hawkish Fedspeak
Israeli Prime Minister Benjamin Netanyahu has vowed to continue the war against Hamas amid international condemnation of an air strike that killed at least 45 people in Rafah on Sunday, per the BBC.
The World Gold Council reported that global physically-backed gold exchange-traded funds (ETFs) witnessed a net outflow of 11.3 metric tonnes last week.
UBS analysts expect gold prices to reach $2,500 an ounce by September and hit $2,600 an ounce by year-end. The forecast is higher than the initial estimates of $2,400 and $2,500 per ounce, respectively.
Consumer Confidence improved slightly in May, the Conference Board reported on Tuesday. The figure rose to 102.0 in May from 97.0 in April, beating the estimation of 95.9.
Fed Governor Michelle Bowman said on Tuesday that she would have supported either waiting to start slowing the quantitative tightening pace or a more moderate tapering process than announced earlier this month.
Fed Minneapolis President Neel Kashkari said that the central bank should wait for significant progress on inflation before cutting interest rates, adding that he expected no more than two rate cuts in 2024.
Technical analysis: Gold price stays bullish in the longer term
The gold price trades with mild losses on the day. Technically, the bullish outlook of the precious metal remains intact as it holds above the key 100-day Exponential Moving Average (EMA) on the 1-hour chart. However, the neutral level of the 14-day Relative Strength Index (RSI) around the 50-midline indicated that further consolidation or directionlessness looks favourable for the time being.
The first upside target will emerge at the upper boundary of the Bollinger Band at $2,427. Sustained yellow metal rallies might pave the way to the all-time high of $2,450. The bullish breakout above this level will see a rally to the $2,500 psychological figure.
On the flip side, a low of May 24 at $2,325 acts as an initial support level for XAU/USD. The next contention level is seen at the $2,300 round mark. Any follow-through selling below this level will expose the lower limit of the Bollinger Band at $2,277, followed by the 100-day EMA of $2,222.
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