Contents
Gold prices (XAU/USD) are experiencing a slight downward trend as traders engage in profit-taking activities ahead of Federal Reserve Chair Jerome Powell’s congressional testimony. The market is keenly awaiting Fed Testimony for insights into the Fed’s potential rate-cutting strategy, which will significantly impact the trajectory of the US dollar and subsequently influence gold prices.
Profit-Taking and Rate Cut Speculation Impact Gold Price Ahead of Fed Testimony
Gold prices are currently exhibiting a mild negative bias as traders opt to lighten their bullish positions following a recent rally. This move is also driven by anticipation surrounding Powell’s testimony and the possibility of a June rate cut by the Federal Reserve. The prevailing sentiment suggests that weaker US macroeconomic data and geopolitical tensions are bolstering expectations for a rate cut, consequently supporting gold prices.
US Economic Data and Its Influence
The release of disappointing US economic data on Tuesday, including a decline in total factory orders and a slowdown in the services sector expansion, reaffirms market expectations of an impending rate cut by the Fed. These developments contribute to a weakened US dollar, further bolstering the appeal of gold as a safe-haven asset.
China’s Economic Woes: Factors to Consider Ahead of Fed Testimony
Ongoing geopolitical tensions coupled with concerns about China’s economic slowdown are also contributing to the support for gold prices. These factors drive investors towards safe-haven assets, mitigating the downside risk for gold amidst profit-taking activities.
Technical Analysis and Price Outlook
From a technical standpoint, the Relative Strength Index (RSI) on the daily chart indicates overbought conditions, prompting caution among bullish traders. While a modest pullback is possible, strong support is anticipated around the $2,100 mark. However, a decisive break below the $2,064-2,062 resistance level could signal a shift in the near-term bias towards bearish territory.
On the upside, resistance is expected near the $2,142-2,144 region, representing the all-time peak retested recently. Further upward movement could propel gold towards the uncharted territory of $2,200, provided there is sustained buying momentum.
Conclusion
As traders await Fed Testimony for clarity on the Fed’s rate-cutting path, gold prices remain steady with a mild downward bias. Profit-taking activities, coupled with speculation surrounding a potential rate cut and geopolitical tensions, continue to influence market dynamics. Technical analysis suggests a cautious approach, with key support and resistance levels guiding near-term price movements.
