GOLD PRICE, CHARTS AND ANALYSIS:
GOLD FORECAST: NEUTRAL
- Hawkish Central Banks and a Dollar Bounce Inspire Range Breakout for Gold Prices.
- Return of Recessionary Fears Could Limit Downside Potential as Safe Haven Demand Returns.
- US Data Next Week Will Remain a Key Driver Next Week with US Core PCE Data of Particular Interest.
- To Learn More About Price Action,Chart Patterns and Moving Averages, Check out the DailyFX Education Series.
READ MORE: Gold Weekly Forecast: Gold (XAU/USD) Prices Delicately Poised Heading into Blockbuster Week
THE WEEK IN REVIEW
Gold bears finally came to the party this week as precious metal printed 3-month lows, down around 2% at the time of writing. Hawkish Central Bank chatter from the European Central Bank (ECB), and FED Chair Powell during his semi-annual testimony on Capitol Hill weighed on the precious metal during the early part of the week with the $1900 psychological level appearing vulnerable. Thursdays hawkish surprise by the Bank of England (BoE) and the Swiss National Bank (SNB) reminding markets that the hiking cycles by major Central Banks may not be done just yet.
The precious metal did enjoy a bounce on Friday to end the week as lackluster US and Euro Area PMI data rekindled recessionary fears. A pullback in US Yields further helped Gold stage an attempted recovery with highs above the $1930 handle but struggled to hold onto its gains following the European close trading at $1918 at the time of writing.
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FEDSPEAK, CORE PCE DATA AND RECESSIONARY FEARS TO DRIVE GOLD PRICES NEXT WEEK
Gold prices remain on edge despite the downside break of the recent range and heading into the new week it will be interesting to see if we do get follow through to the downside. Gold has been threatening a retracement of sorts for a while with the overall uptrend still very much valid at this stage.
Heading into next week and we do have quite a bit of macro data that could drive the US Dollar and Yields and thus Gold prices. The early part of the week will bring the Durable Goods Orders and consumer confidence data before all eyes turn to the Federal Reserve's release of the Bank Stress Test results on Wednesday. Following the US banking turmoil market participants will no doubt be interested to see if the worst is well and truly behind us. Rising rate hike expectations and ongoing hawkish Fedspeak could prove beneficial to the US Dollar and drag Gold prices lower while heightened recessionary fears could support gold prices as safe havens get a boost. It is as I said delicately poised.
Source: CME FedWatch Tool
Given that markets are pricing in a 25bps hike form the Fed in July at around the 74% mark coupled with Fed Chair Powell’s insistence on data dependency moving forward the Core PCE print this week could be a gamechanger. The Core PCE data is after all the Feds Preferred inflation gauge and could see rate hike expectations aggressively repriced should PCE data come in above estimates. This could then prove a challenge for Gold bulls and serve as a catalyst for a break of the psychological $1900 mark.
Here are the five high ‘rated’ risk events as well as speeches by Fed Chair Powell for the week ahead on the economic calendar which could affect Gold prices and lead to a spike in volatility:
For all market-moving economic releases and events, see the DailyFX Calendar
TECHNICAL OUTLOOK AND FINAL THOUGHTS
The weekly chart for XAUUSD has seen a fresh 3 month low printed this week following last week's Doji candle close. Price is however approaching the 61.8% fib retracement zone while at the same time we are about to see a golden cross pattern as the 50-day MA is about cross above the 100-day MA, hinting at a possible recovery in Gold prices. The bullish trend in Gold remains valid without a weekly candle close below the previous higher low which rests on the psychological $1800 handle.
XAU/USD Weekly Chart – June 23, 2023
Source: TradingView
Dropping down to a daily timeframe and the narrative is further supported by Friday’s daily candlestick which is on course to print an inverted hammer candlestick close. An inverted hammer candle usually precedes a bounce higher which we could get on Monday before US data and macro fundamentals begin driving prices.
Having finally broken the $1940-$1970 range the question now is whether the bears can seize control next week and push prices below the psychological $1900 mark. Any pullback on Monday could face resistance by the 100-day MA resting around the $1942 handle while a deeper pullback could bring the 50-day MA in to play around $1977.
Alternatively, a break below the $1900 mark will face support around the $1875 handle before the 200-day MA comes into focus around $1850.
XAU/USD Daily Chart – June 23, 2023
Source: TradingView
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Written by: Zain Vawda, Market Writer for DailyFX.com
Contact and follow Zain on Twitter: @zvawda
