XAUUSD has pulled back today and is in a corrective range bound movement after yesterday’s rally. This is a natural occurrence that usually happens after an impulse allowing for consolidation and some profit taking.

Fundamental Analysis

Gold’s performance was also influenced by the weakening of the dollar, as a weaker dollar makes gold less expensive for overseas buyers. The dollar index remained close to Thursday’s lows, adding to the yellow metal’s support.

Looking ahead, the market’s attention is now focused on the May consumer inflation report for the United States, which is set to be released on June 13, just before the Fed meeting. This report will provide investors with more information about the health of the world’s largest economy and may have an impact on gold prices.

Traders are betting on a June pause and a July rate hike.

Traders are betting on a June pause and a July rate hike.
Despite the recent drop, gold’s overall trend remains positive, and prices are awaiting another catalyst to resume their upward trend. Given that interest rates have been consistently raised since March 2022, the market currently prices in a 76% chance that the Fed will keep them unchanged at the upcoming meeting. However, there is a 51% chance of a 25 basis point rate increase in July.
It’s important to note that rising interest rates raise the opportunity cost of holding non-yielding assets like gold, which may reduce its appeal among investors. As a result, market participants will closely monitor the central bank’s decisions in the coming months.

Technical View

If we get an upwards breakout from the current consolidation channel, we can go looking towards the resistance as shown in the chart below.

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