Gold Price Forecast: XAU/USD bears flex muscles even as US inflation advocates hawkish Fed halt

• Gold Price stays depressed within fortnight-long symmetrical triangle, pressured after three-day losing streak.
• United States inflation cements market’s expectations of no Federal Reserve rate hike but hawkish dot-plot, weighs on XAU/USD.
• Mixed headlines surrounding China, firmer US Treasury bond yields add strength to bearish bias about the Gold Price.
• Surprise Fed moves will be dealt with heavy XAU/USD volatility, which needs caution on trader’s side.

Gold Price (XAU/USD) remains on the back foot around the lowest level in a week, challenging the bearish breakdown of the trend continuation chart pattern, suggesting further downside of the XAU/USD. That said, the Gold Price holds lower grounds near $1,943 amid early Wednesday morning in Asia. It should be noted that the precious metal’s latest weakness pays little heed to the downbeat United States (US) inflation readings while appearing closely (inversely) linked to the firmer US Treasury bond yields.

Gold Price drops despite softer United States inflation

Gold Price teases the technical breakdown of a short-term symmetrical triangle, signaling further downside of the XAU/USD, even as the US inflation numbers match market forecasts. The reason could be linked to the upbeat US Treasury bond yields and China-related news.

On Tuesday, the US inflation data came in mixed for May but managed to please the US Dollar buyers. That said, the headline Consumer Price Index (CPI) drops more-than-expected and prior releases to 0.1% MoM and 4.0% YoY. However, the Core CPI, known as the CPI ex Food & Energy, matches 0.4% monthly and 5.3% yearly forecasts. It’s worth noting that the US headline CPI dropped to the lowest since March 2021 and hence justifies the market’s expectations of the US Federal Reserve (Fed) hawkish halt, which in turn should weigh on the US Dollar and allow the Gold Price to grind higher.

That said, the CME’s FedWatch Tool suggests more than 70% chance of the US Federal Reserve’s (Fed) no rate hike during today’s monetary policy meeting. With this, the US Dollar Index (DXY) dropped to the lowest levels in three weeks, taking the Gold Price down with it, before bouncing off 103.05.

China-linked news, Treasury bond yields also weigh on XAU/USD

While the US Dollar dropped on downbeat United States inflation but couldn’t impress the Gold Price buyers, the reason could be linked to the mixed catalysts surrounding China and the upbeat Treasury yields, as well as the pre-Fed positioning.

People’s Bank of China (PBoC) cuts the Repo Rate to 1.9% from 2.0% and confirms the previous fears suggesting slower economic growth in the world’s biggest industrial player. With this in mind, Bloomberg said, “China’s central bank cut a short-term policy interest rate, easing its monetary stance to help aid the economy’s recovery.”

Elsewhere, the latest fears of the stiff US-China tension also should have weighed on the Gold Price. On Monday, the US expands its ban on imports from Xinjiang. China vows to protect China firms against any US sanctions, per Reuters. Following that, Bloomberg released prepared remarks of US Treasury Secretary Janet Yellen’s scheduled Testimony in front of the House Financial Services Committee as she said that the International Monetary Fund (IMF) and the World Bank (WB) serve as important counterweights to non-transparent, unsustainable lending from others, like China.

Amid these plays, Wall Street cheered downbeat US inflation and hopes of no rate hike from the Fed but the US Treasury bond yields remain firmer. That said, the US 10-year Treasury bond yields rose to a 13-day high of 3.83% whereas the two-year counterpart poked the highest levels in three months with 4.70% mark before easing to 4.67% in the last hours. With this, the market’s demand for bonds and risk-on seemed to have weighed on the Gold Price. However, it all depends upon the Federal Reserve (Fed) for a clear direction.

Federal Reserve’s move is crucial for the Gold Price

Although the recently firmer yields join the downbeat US inflation to weigh on the Gold Price, the XAU/USD move appears unconvincing amid the softer US Dollar. Hence, even if the Fed’s status quo is almost given, the Gold traders will pay attention to the US central bank’s economic forecasts, dot-plot and Chairman Jerome Powell’s press conference for clear directions. The same can keep the Gold bears on the board in case of a hawkish halt, which is more likely.

Also read: Gold Price Forecast: XAU/USD bearish as US CPI fuels optimism

Gold Price technical analysis

Gold Price remains on the back foot as it prods the bottom line of a two-week-old symmetrical triangle.

That said, the below 50.0 level of the Relative Strength Index (RSI) placed at 14, suggests bottom-picking of the XAU/USD from the triangle’s lower line, around $1,942 at the latest.

The following recovery, however, remains elusive unless the Gold Price remains below the stated trend-continuation chart pattern’s top, close to $1,969 by the press time.

Even if the quote Gold Price crosses the $1,969 hurdle, the 200-SMA and a three-week-old horizontal resistance zone, near $1,983-85, will be a tough nut to crack for the bulls before taking control. Also acting as an upside filter is the $2,000, a break of which will welcome the XAU/USD buyers with open hands and a pass to prod the $2,050 hurdle.

On the flip side, the XAU/USD’s break of the triangle’s support of near $1,942 can quickly challenge the yearly low marked in May around $1,932.

Following that, the 61.8% Fibonacci Expansion (FE) of its May 10 to June 02 moves, near $1,910, will precede the $1,900 round figure to act as the final defenses of the Gold buyers.

Overall, stronger resistance on the top and a likely hawkish Fed rate halt keep the Gold sellers hopeful.

Gold Price: Four-hour chart

Trend: Further weakness expected