Gold Price Forecast: XAU/USD May Consolidate in Near Term Amid Interest Rate and Inflation Peak

Highlights

• Gold prices fell due to uncertainty over the Federal Reserve’s monetary policy
• Inflationary risks complicate monetary policy decisions
• Gold prices may consolidate as inflation and interest rates peak

Overview

Gold prices retreated on Tuesday amid uncertainty over the future course of the Federal Reserve’s monetary policy.

At 06:25 GMT, June Comex Gold is trading $1995.50, down $4.90 or -0.24%. The XAU/USD is at $1979.00, down $6.06 or -0.30%. On Monday, the SPDR Gold Shares ETF (GLD) settled at $184.51, up $1.29 or +0.70%.

The slump in U.S. manufacturing activity and the announcement of OPEC+’s production cut sparked inflationary risks, which could complicate monetary policy decision. Meanwhile, the dollar index rose, making bullion expensive for overseas buyers.

Gold Prices May Consolidate as Inflation and Interest Rates Peak

Gold prices may consolidate in the near term as markets monitor oil prices and their impact on inflation outlook.

Higher interest rates increase the opportunity cost of holding non-yielding assets such as gold, which can also affect bullion prices.

However, over the short term, we expect gold to be supported by a scenario where both inflation and interest rates could peak.

This should send the dollar lower and provide an opportunity for an additional move higher. It is important to keep an eye on any upcoming events or announcements that may affect the market including today’s JOLTS report and Friday’s U.S. Non-Farm Payrolls report.

Daily June Comex Gold Technical Analysis

The main trend is up according to the daily swing chart. A trade through $2031.70 will signal a resumption of the uptrend. A move through $1953.70 will change the main trend to down.

The minor trend is also up. A trade through $1965.90 will change the minor trend to down. This will also shift the momentum.

The market is currently testing a minor resistance zone at $1992.70 – $2001.90. The nearest support is a 50% level at $1968.90.

Daily June Comex Gold Technical Forecast

Trader reaction to the minor retracement zone at $1992.70 – $2001.90 is likely to determine the direction of the June Comex gold futures contract on Tuesday.

Bearish Scenario

A sustained move under $1992.70 will indicate the presence of sellers. If this creates enough downside momentum then look for the selling to possibly extend into the support cluster at $1968.90 – $1965.90.

Bullish Scenario

A sustained move over $2001.90 will signal the presence of buyers. Taking out $2008.00 will indicate the buying is getting stronger. This could trigger an acceleration into the minor top at $2023.90, followed by the main top at $2031.70.