Gold Posts Second Weekly Gain Ahead of Fed's Verdict
Alex Boltyan | Jun 09, 2023 04:58PM ET
Gold prices pulled back slightly on Friday but posted the second weekly gain in a row as expectations that the Federal Reserve will pause rate increases continued to take a toll on the US dollar.
At the time of writing, the spot price, XAU/USD, is trading at the $1,960/oz area, down 0.23% on the day but posting a 0.65% weekly advance.
The greenback is torn between mounting expectations that the Fed will maintain the Fed funds target range steady at 5.00%-5.25% at next week's meeting but will raise rates by 25 bps at the next meeting. According to the CME FedWatch Tool, the probability of the Fed hiking rates in July is above 50% following the Reserve Bank of Australia and the Bank of Canada's unexpected increases announced this week.
But before the Fed announces its verdict on Wednesday, the US will release the May consumer price index (CPI) figures on Tuesday. Investors expect the annual inflation rate to decrease to 4.2% while the core rate is increasing to 5.6%. Both events have the potential to trigger USD swings.
From a technical perspective, the XAU/USD pair maintains a neutral to slightly bullish short-term bias according to indicators on the daily chart, while the price is closing just above the 20-day simple moving average (SMA). On the weekly chart, the outlook remains bullish, with the 20-week SMA acting as critical support in the $1,940 area. A loss of this level could deteriorate the medium-term outlook for the yellow metal.
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