Gold Recovers From Three-Month Lows but Lacks Momentum

Gold prices edged slightly higher on Monday after visiting three-month lows last week, as investors continue to reassess monetary policy expectations following hawkish hints from the Federal Reserve. 

At the time of writing, the spot price, XAU/USD, is trading at the $1,923 an ounce zone, just a few bucks above its opening price, having retreated from a daily peak of $1,933.

The shift of expectations regarding the Fed's next steps put the yellow metal under pressure last week, with the XAU/USD price sliding to its lowest level since March at $1,912. 

The Federal Open Market Committee (FOMC) decided to skip a rate hike after ten consecutive increases earlier this month, but the dot plot showed members are now expecting two more hikes this year. This hammered expectations that the Fed was pivoting to a more dovish stance and probably planning on a rate cut or two. Last week, Chair Jerome Powell testified before the US Congress, echoing the hawkish rhetoric, which boosted the dollar and weighed further on gold prices.

With the start of a new week, the metal bounced from recent lows amid a risk-off environment but continues to seesaw on USD dynamics. Attention now turns to US Personal Consumption Expenditure (PCE) price index data, the Fed's preferred inflation gauge,  which will be released on Friday. 

From a technical perspective, the XAU/USD pair holds a short-term negative outlook, according to indicators on the daily chart, although the broader picture remains constructive. 

The immediate resistance area is seen at the $1,945-50 zone, where the 20- and 100-day simple moving averages (SMAs) converge. A break above this area could ease the immediate pressure targeting the $1,970 level en route to $2,000. On the flip side, Friday's three-month low of $1,910 is the first support area, followed by $1,890 and $1,870.