Gold price forecast:
- gold prices Pulling back and giving up early session gains generated from April in the US economic inflation a report
- US Treasury yields are falling, but they are failing to boost precious metals on a sustainable basis
- This article discusses the key technical levels to watch on XAU/American dollar during the coming days
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Gold went on a wild ride on Wednesday. In early morning trading, the precious metal managed to rise nearly 0.85% after weaker-than-expected US CPI data led to a sharp decline in US Treasury yields. However, the advance was short-lived, with XAU/USD back in negative territory in the late New York afternoon, down around 0.2% at $2035 at the time of writing.
Bullion’s counterintuitive reaction to bond movement suggests that the topic of “slowing inflation” may have circulated beforehand; After all, prices are up more than 11% since early March, so the rally has clearly extended. This suggests that nominal bond yields would have to fall much more in order to see higher highs and possibly a new record in the yellow metal.
It is unlikely that the prerequisite for retrieval of gold is a long rod for leaching. Growing headwinds for the US economy, including a tightening of credit conditions for businesses and households in the wake of US banking sector turmoil that first erupted in March, could push the country into a painful recession later this year.
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As the economic outlook worsens, forward-looking traders will try to get ahead of the Fed and attempt sharp rate cuts, putting downward pressure on the Treasury curve. Against this backdrop, it is only a matter of time before the 10-year yield heads towards fresh multi-month lows below 3.25%, which was April lows in 2023.
The specter of a recession, along with the unresolved drama of the US debt ceiling, could soon start to drive a surge in demand for safe-haven assets. Gold, historically considered a defensive asset, will benefit from flight-to-safety rings in the financial markets. For these reasons, the bullish bias of the XAU/USD pair remains intact for the time being.
|
change in |
Longs |
Shorts |
Hey |
| Daily | -1% | -8% | -4% |
| weekly | 9% | -15% | -3% |
Technical analysis of gold prices
And while the direction of travel is likely to be to the upside, a period of consolidation should not be ruled out after the strong rally seen over the past two months. This means that gold could remain trapped in a narrow range in the near term.
In terms of key technical thresholds to watch, initial support is at the psychological $2,000 level, but if this floor is broken, we could see a pullback towards $1,975. On the upside, the first resistance to consider is at $2050. If the bulls can get that barrier out, a re-test of the 2023 peaks could happen shortly thereafter.