Gold Price Analysis: XAUUSD struggles to make a comeback and hovers near the yearly minimum

Gold Price had difficulty capitalizing on the slight intraday rebound from a new yearly low. Recession worries and the risk-averse disposition continued to provide some support for the commodity. A continuation of the USD’s recent strong bullish run worked as a headwind for the XAUUSD.

Gold Price recovered an intraday decline to its lowest level since August 2021, but was unable to capitalize on the recovery effort. In the early European session, the XAUUSD oscillated between mild gains and slight losses, but currently appears to have steadied around $1,735.

A prolonged selloff on the equities markets, prompted by persistent worries of a probable global recession, proved to be a significant factor in the precious metal’s appreciation. Nonetheless, persistent US dollar purchasing, boosted by hawkish Fed forecasts, served as a headwind and capped any significant advance for dollar-denominated gold.

In actuality, the USD Index climbed to a new 20-year high and continued to get support from the growing consensus that the Fed would maintain its aggressive policy tightening course to combat surging inflation. The FOMC meeting minutes released last week confirmed the predictions, indicating that another 50 or 75 bps rate rise is expected at the forthcoming FOMC meeting in July.

In addition, policymakers highlighted the necessity to combat inflation regardless of the economic consequences. Wednesday’s release of the latest US consumer inflation numbers will continue to dominate market sentiment. The US CPI data will play a significant role in determining the Fed’s policy stance and the next leg of directional movement for non-yielding gold.

In the meanwhile, the deteriorating global economic picture and a further decrease in US Treasury bond rates, driven by a flight to safety, may continue to bolster the gold price. Aside from this, the USD price dynamics will be monitored for short-term trading opportunities in the absence of market-moving US economic data.

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