Gold prices ended a three-week negative streak, supported by improved market sentiment and lower US Treasury yields. XAU/USD rallied after hitting $1,930, its lowest level since mid-March. A critical report is not expected next week as the market’s attention is turned to the 13-14 June US Federal Reserve (Fed) meeting. So, what happened in the market? How can the expected developments in the coming period affect Bitcoin and gold?
What happened last week?
Positive data from China and the still-strong US jobs market, as well as improved market sentiment supported by the resolution of the debt limit issue, boosted stock prices and riskier assets. After rising for three consecutive weeks, the US Dollar Index fell in contrast to gold prices rebounding from two-month lows. Economic data from the US showed weak numbers for manufacturing activity (ISM Manufacturing PMI) and a robust labor market. The official US jobs report beat expectations, with nonfarm payrolls increasing by an impressive 339,000 in May and a positive revision of April’s numbers from 253,000 to 293,000.
On the downside, the unemployment rate rose to 3.7 percent. Overall, it was a positive report, in line with the data released by ADP on Thursday. Employment data provides evidence for those looking to raise interest rates even higher. There are no signs of an imminent recession in the US. However, market prices continue to show some expectations that the Fed will start cutting interest rates before the end of the year. The odds are lower than they were a month ago, according to the CME Fed Tool.
Fed meeting approaching
The coming week looks relatively calm in terms of economic data. Because it can be seen as “the week before the FOMC meeting”. Only two major reports will be released in the US next week: ISM Services PMI (Monday) and weekly jobless claims (Thursday). The Fed will hold its monetary policy meeting on June 13-14. Market participants expect a pause in the tightening cycle. The door opened by Fed Chairman Powell by proposing a pause a few days ago attracted more attention with the recent comments of Fed officials in support of the pause. Market participants will not hear any more comments from FOMC members as they enter the blackout period on Saturday.
Markets expect a pause for the next Fed meeting, but that’s no guarantee. Some analysts see the possibility of another rate hike, especially after the latest employment figures. While the data boosted expectations for tightening, Chairman Powell and other members counterbalanced that effect by signaling their desire to “skip a meeting.” The Consumer Price Index for May will probably have the final say, which will be released on June 13.
It will be a relatively quiet week outside the US as well. Chinese data will be scrutinized closely for more signs of how its economy is performing. Data to be released include Caixin Services PMI (Monday), trade data (Wednesday) and Consumer Price Index (Friday). The Reserve Bank of Australia (RBA) and the Bank of Canada (BoC) will hold their monetary policy meetings. However, no change in interest rates is expected.
How do these developments affect the gold price?
Central banks are far from declaring victory in the fight against inflation, but the tightening cycle seems to be coming to an end. This means that there will be no further rate hikes. It could support demand for government bonds, pushing yields down, which is a positive scenario for gold. If the improvement in market sentiment in the last session continues and puts pressure on the US Dollar, XAU/USD could gain another support. For the bulls, it will be crucial if Treasury yields continue to decline or experience limited recovery. The upside path for gold is complex. It may need more signs of slowing inflation and negative US economic data.
XAU/USD’s recovery from the $1,930 region met resistance near the $1,985 region, where the 20-day Simple Moving Average (SMA) is located, according to analyst Eren Şengezer. As long as it trades below this level, the yellow metal remains vulnerable to sharp corrections that could find support at $1,950 and $1,930. Consolidation above $1,985 will be key for a test of $2,000, with the next target at $2,010.
The weekly chart offers a positive outlook as XAU/USD managed to stay above the flattening 20-week SMA at $1,935. A one-week close below this line would be a strong bearish sign. A solid break above $1,985 is needed to avoid extra bearish pressure. Also, the price must stay above $1,945.
What does the gold price prediction survey show?
A gold survey shows a mixed picture with trend divergence for XAU/USD in the near term. The one-month target is around the current price level. However, in a quarterly perspective, the majority of experts surveyed see gold again above $2,000.
How do these developments affect Bitcoin?
So, how will the developments we mentioned above affect Bitcoin? As we have reported as Kriptokoin.com, gold and Bitcoin have been closely related lately. Because the gold-Bitcoin correlation has increased. That’s why employment data boosted gold and Bitcoin over the past week. In the upcoming period, the general difficulties of central banks and the implementation of harsh monetary policies may cause investors to want to protect their money and invest in “safe haven assets” such as gold and Bitcoin.
Just like gold, Bitcoin continues to gain strength from negative US data. On the other hand, the decline of the US Dollar Index also supported Bitcoin. Because DXY and gold/Bitcoin show an inverse correlation. As a result, investors will follow the Fed’s statements and the policy decisions of central banks around the world in the upcoming period.
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