Gold Price Recovers as bulls regain serenity

The Gold Index has recovered some ground after earlier slipping below the $1800 mark on Friday, on higher US Treasury yields, which during the session are sliding, thus lifting the prospects of the non-yielding metal. XAU/USD is trading almost flat, around $1811.02 a troy ounce.

As for market sentiment, the rhetoric of the last couple of weeks remains, with European and US equity bourses split between gainers and losers. The Federal Reserve’s aggressive tightening expectations, China’s Covid-19 lockdowns, and high inflationary pressures spurred by the ongoing war in Ukraine remain on investors’ radar.

Meanwhile, the yellow metal has benefited from lower US Treasury yields, with the 10-year benchmark note down five basis points, sitting at 2.88%, a headwind for the greenback. The US Dollar Index, a measurement of the buck’s value, is gaining 1.26%, sitting at 104.517, but without weighing on gold.

In the mid-North American session, money market futures have priced in a 100% chance of a 50-bps increase by the Fed in the June meeting. Earlier in the day, the New York Fed President John Williams said that the number one issue is inflation, and it is running far too high and stubbornly persistent.

Williams stated that 50-bps rate hikes make sense at upcoming meetings and added to the rhetoric of central bank policymakers that China’s struggling with the coronavirus and Ukraine’s war are the significant drivers of market volatility.

Elsewhere, China continues struggling with Covid-19 as its Industrial Production shrank by 2.9, lower than the 0.4 growth expected, its lowest reading since March 2020. Despite the previously-mentioned, a ray of hope shows in the window, as Shanghai is about to gradually begin reopening businesses, including shopping malls and the manufacturing hub. Contrarily Beijing will extend work from home guidance in several districts.

In the week ahead, the US docket would feature Fed Chief Jerome Powell, St. Louis President James Bullard, and Chicago’s Fed President Charles Evans. Data-wise, April’s Retail Sales, Industrial Production, Building Permits, and Initial Jobless Claims would shed some light regarding the actual economic status of the United States.

The Gold Price jumped near the YTD low at around $1786 and is forming a “gravestone doji,” which is perceived as a signal of “indecision.” Also, it’s worth noting that an almost-two-year-old upslope trendline, previous support, has been broken. Unless gold bulls reclaim the aforementioned, XAU/USD is vulnerable to further downward pressure.

If XAU/USD’s bulls reclaim the upslope trendline, they will find resistance levels around the 200-DMA at $1837, followed by May 3 cycle low at $1850, and then the $1890 barrier.

On the flip side, XAU/USD’s first support would be $1800. Break below would expose May 16 daily low at $1786, followed by the YTD low at $1780 and then December’s 15 cycle low at $1752.35.