Gold Price Forecast: XAU/USD recoups losses amid hawkish Fed rhetoric, eyeing $1980 resistance

• Gold climbs 1.12%, trading at $1979.90, as the US Dollar’s strength subsides, investors eyeing the $1980 resistance level.
• Remarks from Fed Chair Jerome Powell and US Treasury Secretary Janet Yellen shook the market, resulting in a significant uptick in XAU/USD.
• XAU/USD is still on track for a 1.90% weekly loss after robust US Retail Sales, Industrial Production, and falling unemployment claim hint at possible Fed action.

Gold price climbed more than 1% on Friday, trimming some losses sustained during the week as the Fed’s hawkish rhetoric bolstered the greenback, which posted gains of 0.37%, per the US Dollar Index (DXY). At the time of writing, XAU/USD is trading at $1979.90, up daily 1.12%.

XAU/USD soars over 1% as Treasury Secretary’s remarks spark risk-off Impulse, US Dollar slips

XAU/USD bottomed at around $1954.14 as the Federal Reserve (Fed) Chair Jerome Powell delivered remarks at a conference on Friday. Fed Chair Jerome Powell indicated that inflation currently exceeds the target level and stresses the Fed’s unwavering commitment to guide inflation back towards the 2% target, asserting that “failure would cause greater harm.”. Furthermore, Powell noted the strength of the banking system and suggested that tighter banking credit conditions may prevent a potential rise in rates.

At the same time, a news headline that said that CNN reported that US Treasury Secretary Janet Yellen told bank CEOs on Thursday that more merges may be necessary after a series of bank failures spurred a risk=off impulse; hence, XAU/USD soared sharply.

Discussions about the US debt ceiling paused as the US House of Representatives leader Kevin McCarthy said. In contrast, the White House commented that a deal remains possible.

In the meantime, the US Dollar Index (DXY), a gauge of the buck’s performance against a basket of six peers, slides 0.30%, down at 103.017, what appears to be traders booking profits ahead of the weekend.

Nevertheless, raising US Treasury bond yields cut short the XAU/USD rally. The US 10-year benchmark note rate yields two and a half basis points at 3.673%.

Even though XAU/USD is cutting some of its weekly losses, it is on its course to lose 1.90% in the week after solid US Retail Sales, Industrial Production, and falling unemployment claims warrant further action by the Fed.

XAU/USD Price Analysis: Technical outlook

After three days of consecutive bearish candlesticks, the XAU/USD is forming a bullish engulfing candle pattern and is about to reclaim the 50-day Exponential Moving Average (EMA) at $1977.38. Given the backdrop, the XAU/USD could resume its uptrend, but the Relative Strength Index (RSI) indicator at bearish territory can put a lid on XAU/USD’s gains.

The XAU/USD must achieve a daily close above $1980 for a bullish resumption. Upside risks lie at the 20-day EMA at $1999, followed by the May 16 high of $2018.28. On the other hand, the XAU/USD first support would be the May 18 swing low of $1951.87, followed by the 100-day EMA at $1931.