Weak US Durable Goods Orders data has failed to spur a gold rebound as traders await Fed speak/minutes.XAU/USD was last trading lower by over 0.5% in the mid-$1850s, with the bears eyeing a retest of the 200DMA.
Though weaker than expected just-released US Durable Goods Orders data for April saw long-term US yields hit fresh monthly lows, a reflection of rising concerns about the current health of the US economy, this has not been enough to lift gold back into positive territory on the day. XAU/USD continues to trade with losses of more than 0.5% on the day in the mid-$1850s, weighed as the US dollar clings onto gains ahead of upcoming remarks from Fed Vice Chair Lael Brainard and the release of the May Fed meeting minutes later in the day.
The US dollar has been weakening over the last few sessions, with the DXY pulling back from annual highs above 105.00 to current levels in the mid-102.00s, a reflection of position adjustment following a period of prolonged US dollar outperformance as well as recent downside in long-term US yields. This has facilitated a bounce in gold from sub-$1800 levels to the $1850s.
But the message from Fed policymakers in recent weeks has remained resolutely hawkish. The debate right now is over whether the Fed will be able to pause interest rate hikes when it gets to neutral and the extent to which it might need to raise interest rates beyond neutral. The debate is not over the need to tighten rates back to neutral levels, implying the bank is on autopilot for plenty more tightening this year, including two 50 bps moves at the next two meetings.
As a result, many strategists suspect that recent USD weakness will likely prove short-lived, suggesting XAU/USD may not be able to sustain itself at mid-$1800 levels for long. If today’s Fed speak/minutes trigger a hawkish market reaction, traders should look out for gold retesting its 200-Day Moving Average around the $1840 levels.
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