• Gold buyers struggle to extend post-Fed rally amid recession fears, pre-data caution.
• Fed matched market’s forecasts of 0.75% rate hike, Chairman Powell favored XAU/USD bulls.
• US Treasury yield inversion keeps recession fears on the table, highlights flash readings of US Q2 GDP.

Gold price (XAU/USD) fades the Fed-inspired rally as the metal seesaws around $1,735 during Thursday’s Asian session. That said, the bullion prices rallied the most in one week to refresh a fortnight high on the US Federal Reserve’s (Fed) showdown. However, fears of economic slowdown and market anxiety ahead of the key US data seem to probe the XAU/USD bulls of late.

Despite retreating, the US Treasury yield curve continues to signal the recession fears and weigh on the gold price at the latest. Reuters mentioned that the US government bond market is sending a fresh batch of signals that investors are increasingly convinced the Federal Reserve's aggressive actions to tame inflation will result in recession. “Some of those moves reversed slightly on Wednesday, with rates at the short end of the curve turning lower on expectations of the Fed being less likely to continue with super-sized hikes,” adds Reuters.

It should be noted that the US 10-year Treasury yields dropped nearly four basis points (bps) to 2.78% while the 2-year bond coupons slumped by 2.58% to 2.98% after the Fed’s 0.75% rate hike. Even so, the gap between the key US bond coupons remains the widest since 2000 and in turn hints at the US recession woes.

Further, the market’s cautious mood ahead of the virtual talks between US President Joe Biden and his Chinese counterpart Xi Jinping seems to challenge the gold buyers. On the same line is the anxiety before the flash readings of the US Q2 Gross Domestic Product (GDP) Annualized, expected 0.4% versus -1.6% prior.

Also read: US GDP Preview: Win-win for the dollar? Economy's flirt with recession to boost the buck

On Wednesday, the US Federal Reserve (Fed) matched market forecasts by announcing a 75-bps rate increase. The underlying reason for the pair’s weakness could be attributed to Fed Chairman Jerome Powell’s speech as it signaled that the hawks are running out of fuel. Key comments from the Fed’s Powell were that the rates had reached neutrality, so there won't be any more forward guidance, as well as rates will be decided meeting by meeting.

It should be noted that the mixed data and recent risk-off mood also seem to challenge the XAU/USD bulls. Talking about the data, US Durable Goods Orders rose by 1.9% MoM versus expectations of -0.4% and the revised prior of 0.8%. Further, the Nondefense Capital Goods Orders excluding Aircraft also increased by 0.5% compared to 0.2% market consensus and 0.6% prior. Additionally, the US Pending Home Sales dropped by 8.6% MoM in June, compared to the market expectation for a decrease of 2% and following May's growth of 0.4%.

While portraying the mood, the S&P 500 Futures drop 0.15% intraday at the latest while the Asia-Pacific markets traded mixed during the initial hours of Thursday even if Wall Street benchmarks closed positive. That said, the US 10-year Treasury yields pares recent losses around 2.78% by the press time.

Technical analysis

Gold price remains firmer around a two-week top as bulls jostle with the 21-DMA resistance near $1,740. Keeping the buyers hopeful are the MACD signals and the metal’s sustained trading beyond the 10-DMA, as well as the weekly support line.

That said, XAU/USD upside past $1,740 could aim for the downward sloping resistance line from June 13, close to $1,750 by the press time.

However, the metal’s successful run-up beyond $1,750 enables gold buyers to aim for the $1,800 threshold before rushing towards the mid-June swing low near $1,805.

Alternatively, pullback remains elusive beyond $1,718, comprising the 10-DMA and one-week-old ascending trend line.

Following that, the $1,697 could act as the last defense fur buyers before directing XAU/USD bears towards the yearly low of $1,680.

Gold: Daily chart

Trend: Limited upside expected