Gold price struggles to capitalize on the previous day’s modest recovery from the 100-day Simple Moving Average (SMA) and oscillates in a narrow trading band through the first half of the European session on Tuesday. The XAU/USD trades just above the $1,960 level, nearly unchanged for the day and well within striking distance of over a two-month low touched last week.
Reviving US Dollar Demand Caps Gains For Gold Price
The US Dollar (USD) attracted some dip-buying and stalls the overnight slide that followed the disappointing release of the United States (US) macro data and turned out to be a key factor acting as a headwind for the Gold price. A survey from the Institute for Supply Management (ISM) showed that economic activity in the US services sector barely grew in May and fueled speculations that the world’s largest economy was cooling. The Prices Paid sub-component fell to a three-year low and reaffirmed bets for an imminent pause in the Federal Reserve (Fed) rate-hiking cycle.
Dovish Federal Reserve Expectations Lend Support To XAU/USD
It is worth recalling that a slew of influential Fed officials backed the case for skipping an interest rate hike in June last week. Moreover, the markets are currently pricing in a greater chance that the US central bank will leave interest rates unchanged at the June 13-14 Federal Open Market Committee (FOMC) policy meeting. This, in turn, leads to a further decline in the US Treasury bond yields and might hold back the USD bulls from placing aggressive bets. Apart from this, the prevalent cautious market mood continues to act as a tailwind for the safe-haven Gold price and limits the downside.
The Focus Remains Glued To The June 13-14 FOMC Meeting
The aforementioned fundamental backdrop suggests that the path of least resistance for the XAU/USD is to the upside. Traders, however, seem reluctant and prefer to wait for more clarity about the Fed’s near-term policy outlook. Hence, the focus will remain glued to the highly-anticipated FOMC decision, scheduled to be announced at the end of a two-day policy meeting next Wednesday. In the meantime, the US bond yields will continue to play a vital role in influencing the USD price dynamics without any relevant market-moving economic releases from the US on Tuesday.
Gold Price Technical Outlook
From a technical perspective, the recent failures to find acceptance below the 100-day SMA and the subsequent move-up warrant caution for bearish traders. That said, the lack of meaningful buying makes it prudent to wait for a sustained strength beyond the $1,983-$1,985 supply zone before confirming that the recent pullback from the all-time high touched in May has run its course. The Gold price might then aim to reclaim the $2,000 psychological mark and climb toward the next relevant hurdle near the $2,010-$2,012 region.
Conversely, bearish traders must wait for a clear breakdown below the 100-day SMA, currently pegged around the $1,940-$1,939 zone, before placing fresh bets. Some follow-through selling below the May monthly swing low, around the $1,932 area, will reaffirm the negative bias and make the Gold price vulnerable, accelerating the fall toward the $1,900 round figure. The downward trajectory could extend further and drag the XAU/USD towards the $1,876-$1,875 horizontal support en route to the important 200-day SMA, currently around the $1,840-$1,839 region.