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Gold Remains on the Back Foot Ahead of Fed Decision

ByAlex Boltyan
Published 06/13/2023, 12:24 PM
Updated 07/09/2023, 06:32 AM
XAU/USD
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GC
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Gold prices edged lower for a third day in a row on Tuesday, even though lower-than-expected US inflation data cemented expectations that the Federal Reserve will refrain from hiking rates on Wednesday. 

At the time of writing, gold spot price, XAU/USD, is trading at the $1,945/oz area, 0.59% below its opening price and printing the third daily decline in a row. 

The US Consumer Price Index (CPI) rose by 0.1% in May, below the expected increase of 0.2%. The annual inflation rate eased from 4.9% to 4.0%, hitting the lowest level in over two years. The core CPI advanced 0.4%, in line with expectations, and the YoY rate slowed down to 5.3% in May from 5.5% in April.

Although as the knee-jerk reaction US yields tumbled, weighing on the greenback, they've regained the composture with 2-, 5- and 10-year yields quoting above their opening levels during the American afternoon.

On Wednesday, the Federal Reserve will announce its monetary policy decision and update economic projections. Following the latest series of US economic data, markets expect the central bank to remain on hold this meeting, keeping the federal fund target range at 5.00%-5.25%, and resume rate increases at the July meeting. 
XAU/USD Daily Chart
From a technical perspective, the XAU/USD pair holds a short-term slightly bearish bias, according to indicators on the daily chart, while the price is testing critical support at the 100-day simple moving average (SMA) at around $1,940. 

The loss of this level would point to further declines targeting the $1,900 level. On the other hand, a recovery of the 20-day SMA at $1,960 would ease the immediate pressure and pave the way to a retest of the $2,000 psychological level.

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