25 May 2022, 19:39
Gold retreats from weekly highs around $1870 as investors prepare for the Fed’s May minutes.
The greenback remains buoyant, despite falling US bond yields and weighs on XAU/USD’s price.
Gold Price Forecast (XAU/USD): Break above $1870 to send the precious metal towards $1890; otherwise, a re-test of the 200-DMA around $1839 is on the cards.
Gold spot (XAU/USD) slides below the 20-day moving average (DMA) and accelerates towards the 200-DMA at $1839.66 on Wednesday, courtesy of a positive market mood. At the time of writing, XAU/USD is trading at $1844.98, down 1.10%.
Broad US Dollar strength weighs on Gold prices, albeit falling US Treasury yields
On Wednesday, the non-yielding metal, alongside other precious metals, falls as the greenback remains buoyant and jumps from weekly lows. The US Dollar Index, a gauge of the greenback’s value, is gaining 0.52%, currently at 102.300. Meanwhile, the US 10-year treasury yield is almost flat in the day, stationary at 2.752%, as market players wait for the Federal Reserve’s Open Market Committee May minutes.
Sentiment-wise, market players shrugged off concerns that the Federal Reserve’s tightening cycle could cause a recession. Global equities are recording solid gains. Meanwhile, money market futures showed that investors are scaling back their bets on the Federal Funds Rate (FFR) for 2023, widely expected to finish around 3%, to just above the 2.50% threshold.
On Tuesday, the Atlanta Fed President Raphael Bostic stated that the Fed might pause its tightening cycle once hiking rates to the 2% threshold so the central bank can witness how the economy behaves.
Before Wall Street opened, the US economic docket unveiled housing data, which came mixed but tilted positively, albeit concerns that the US economy might hit a recession. At the same time, the Durable Goods Orders for April grew steadily but missed expectations. At around 18:00 GMT, the Federal Reserve would unveil its May minutes, giving traders additional clues regarding the US central bank monetary policy plans.
In the week ahead, the US docket would feature GDP Estimate figures, Initial Jobless Claims, Pending Home Sales, and the Fed’s favorite measurement for inflation, the Personal Consumption Expenditure (PCE).
Gold Price Forecast (XAU/USD): Technical outlook
On Wednesday, the XAU/USD remains downward pressured, tumbling below the 20-DMA and also threatening to slide beneath the trend-setter 200-DMA at $1839.66. It appears that Gold’s pullback could be some profit-taking ahead of the release of the FOMC minutes. However, any further hawkish reinforcement by the Fed’s minutes could send the yellow metal towards the aforementioned 200-DMA and beyond, targeting May lows around $1786.50.
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