The price of gold (XAU/USD) is on the decline again, falling sharply to near $2,340 in Wednesday’s European session. This pullback comes after a failed attempt at recovery towards $2,360.

Market Dynamics:

• Hawkish Fed Rhetoric: Comments from Federal Reserve officials suggesting the continuation of higher interest rates for an extended period weigh on gold prices.
• Focus on US Inflation Data: Investor attention has shifted towards the release of the core Personal Consumption Expenditure Price Index (PCE) data for April on Friday. This key inflation measure is expected to show continued growth, potentially leading to sustained high interest rates.
• Rising Interest Rates and Bond Yields: The prospect of higher interest rates and rising US Treasury yields reduce the appeal of gold, as it offers no fixed income. This strengthens the US Dollar, further pressuring gold prices.

Technical Analysis (Gold Price):

• Inverted Flag Breakdown: The breakdown of an inverted flag chart pattern on the hourly timeframe suggests a resumption of the downtrend for gold.
• Moving Averages and RSI: The gold price falling below the 50-period EMA (around $2,350) and the 14-period RSI dipping into bearish territory (20.00-40.00) indicate a potential continuation of the decline.

Support and Resistance:

• Downside Break: A break below the May 24th low of $2,320 could trigger further losses for gold.
• Upside Move: Conversely, a recovery above the May 28th high of $2,365 would signal a potential reversal in the downtrend.

The wait for the US inflation data and the prevailing hawkish stance from the Fed are creating a cautious market sentiment, putting downward pressure on gold prices. The technical indicators also suggest a possible continuation of the decline in the near term. However, a significant rise in gold prices hinges on a surprise decline in the upcoming inflation data or a shift in the Fed’s monetary policy stance.