- The yellow-metal remains pressured ahead of the Federal Reserve May meeting.
- A downbeat market mood, courtesy of China’s Covid-19 struggling and weak PMIs reported, threatens to derail the world’s second-largest economy.
- Gold Price Forecast (XAU/USD): Neutral biased, though a daily close below the 100-DMA might put the 200-DMA in play.
Gold spot (XAU/USD) remains under pressure for the second consecutive trading day, and for the first time in May, as market participants prepare for the Fed’s May meeting, where investors expect a 50 bps increase to the Federal Funds Rates (FFR) as well as the begin of the QT. At the time of writing, XAU/USD is trading at $1865.91 a troy ounce.
Risk-aversion ahead of the Fed meeting boosts the greenback
The market sentiment remains dampened as the US central bank takes center stage in a busy week in the US economic docket. Alongside the Fed’s May meeting, the US ISM Manufacturing PMI for April was released earlier as Wall Street opened, with the reading showing that manufacturing slowed to its lowest level in 21 months. The reading came at 55.4, missing expectations and lower than March’s 57.1.
Regarding the report, the ISM Manufacturing Business Survey Committee chair Timothy Fiore said new coronavirus outbreaks overseas were “creating a near-term headwind for the US manufacturing community,” noting that some manufacturers worried “about their Asian partners’ ability to deliver reliably in the summer months.”
In the meantime, US Treasury yields are skyrocketing during the day. The US 30-year broke the 3% threshold, while the barometer for US Treasury yields, the 10-year benchmark note, surges five and a half basis points, sitting at 2.998%. That, alongside overall greenback strength, as shown by the US Dollar Index up 0.42%, at 103.649, weighed on the non-yielding metal.
Factors alongside the busy US economic docket featuring ADP and US Nonfarm Payrolls employment reports remain in the backdrop. China keeps struggling to tackle the recent coronavirus flare-up that struck Shanghai and has already spread to Beijing. Restrictions could be re-established in Shanghai, while Beijing tested millions of people on a May Day holiday, as reported by Reuters. It’s worth noting that Caixin Manufacturing and Services PMIs, plunged below expectations.
Gold Price Forecast (XAU/USD): Technical outlook
The XAU/USD’s daily chart depicts the yellow metal as neutral biased. At the time of writing, gold is trading below the 100-day moving average (DMA) at $1879.51, a level that, if it gives way to XAU/USD bears to record a daily close below it, could open the door for a drop towards the 200-DMA around $1834.45.
On the downside, gold’s first support would be the 200-DMA at $1834.45. Break below would expose an upslope trendline around $1810-15, followed by a renewed test of $1800.
Upwards, XAU/USD’s first resistance would be the 100-DMA at $1879.51. A breach of the latter would expose $1890, followed by $1900, and then April’s 29 daily high at $1919.77.