Gold Price recovery seeks validation from $1,820 ahead of ECB, Fed

• Gold Price bounces off one-month low to challenge bears, grinds higher around short-term key hurdle of late.
• US Treasury yields, DXY retreat from multi-day high as traders brace for hawkish Fed.
• Softer US PPI, upbeat data from China also allowed bears to take a breather.

Gold Price (XAUUSD) rebounds from monthly low as traders brace for the Fed’s verdict amid a sluggish session during early Wednesday morning in Europe. That said, the precious metal recently picks up bids to $1,816, reversing the pullback from the intraday high surrounding $1,820, by the press time.

Gold Price rebounds on softer yields

US 10-year Treasury bond yields ease from the highest levels since 2002, down three bps near 3.45% at the latest, amid the market’s anxiety ahead of the key Federal Open Market Committee (FOMC). This contrasts with the market’s gung-ho about the 75 basis points (bps) of the Fed’s rate lift during today’s meeting, as well as the political pressure on the US central bank witnessed during late Tuesday. The reason for the bond coupon’s recent weakness could be linked to the bond-buying by China and Japan, as well as softer the US Producer Price Index (PPI) data. That said, the US PPI matched 0.8% MoM forecasts, also easing to 10.8% YoY figures versus 10.9% expected and prior readouts. The PPI ex Food & Energy, known as Core PPI, dropped below 8.6% YoY forecasts to 8.3%.

Also read: Gold Price Forecast: XAUUSD could stage a solid comeback on dovish Fed rate hike

China data, PBOC moves underpin gold’s recovery

Upbeat prints of China’s Retail Sales and Industrial Production for May join the People’s Bank of China’s (PBOC) liquidity injection to keep the gold prices afloat. The reason could be linked to China’s status as one of the world’s top gold consumers. China’s Retail Sales improved to -6.7% versus -7.1% expected and -11.1% prior while the Industrial Production reversed -0.7% forecast with 0.7% expansion during May. Further, PBOC injected CNY200 billion via one-year medium-term lending (MLF) facility on Wednesday. Additionally, the Chinese central bank also matched wide market expectations while keeping the rate for one-year MLF operation rate unchanged at 2.85%.

US diplomats push for inflation control

US policymakers crossed wires during late Tuesday while indirectly pushing the Fed towards faster/heavier rate hikes. Notable among them were, White House (WH) Economic Adviser Brian Deese and National Economic Council Deputy Director Bharat Ramamurti. WH’s Deese mentioned that the White House’s aim is to ease the price pressure and the Federal deficit during the interview. On the same line, Bharat Ramamurti told Bloomberg TV on Tuesday that inflation was a global problem but added that the United States was "well prepared."

Fed’s Powell holds the key to further XAUUSD upside

US Federal Reserve Chairman Jerome Powell

Federal Reserve Chairman Jerome Powell has a tough task on hand as the swirling inflation and recession fears challenge the US central bank’s previous bias to announce a 50 bp rate hike in June. “Investors have dramatically raised their bets that the U.S. Federal Reserve will raise interest rates by 75 basis points (bps) rather than 50 bps on Wednesday, a swing in expectations that has fuelled a violent selloff across world markets,” said Reuters. In his latest comments, published in late May, Fed’s Powell showed readiness to act given the inflation woes continue to challenge policies’ impact.

ECB is important too

European Central Bank (ECB) is up for an unscheduled meeting to discuss the current market conditions. The surprise from the central bank keeps Gold Price traders on the edge as the bloc’s central bank previously failed to impress hawks by announcing only a 25 bps rate hike in July, versus 50 bps expected. The same raises expectations of a bold move by the ECB, which in turn could propel the XAUUSD.

Gold Price technical outlook

Gold Price recovers from a monthly low as buyers attack 78.6% Fibonacci retracement (Fibo.) of December 2021 to March 2022 upside. In addition to the key Fibo. level, the most bearish MACD signal in a month joins the downbeat RSI, not oversold, to keep XAUUSD bears hopeful.

Even if the quote rises past the $1,820 immediate hurdle, the 200-DMA and a downward sloping trend line from March, respectively around $1,842 and $1,862, could challenge the gold buyers. Also acting as an important upside hurdle is the 50-DMA level of $1,878.

Alternatively, pullback moves may initially aim for the $1,800 threshold before highlighting the yearly horizontal support area close to $1,787-82. Following that, the late 2021 bottom around $1,753 will be in focus.

Overall, Gold Price remains on the bear’s radar despite the latest corrective pullback.

Gold range pattern activated ahead of the FOMC