Gold Price Outlook Mired Ahead Of June By Negative RSI Slope

The price of gold may continue to pull back from the 2020 high ($1765) as the advance from earlier this month stalls ahead of the 2012 high ($1796), but the weakness may end up being short lived as bullion has traded to fresh yearly highs during every single month so far in 2020.

It remains to be seen if the bullish behavior in gold will persist in June as the Federal Reserve prepares to launch the Municipal Liquidity Facility along with the Main Street Lending Program, and the central bank appears to be on track to actively expand its balance sheet over the coming months as Vice-Chairman Richard Clarida warns that the US economy is expected to “contract at an unprecedented pace in the second quarter.”

Boston Fed President Eric Rosengren shared similar remarks during an interview with CBS as he anticipates “double digit unemployment through the end of this year,” with the official going onto say that it would take “a vaccine or other medical innovations” to restore the US labor market back to full employment.

In turn, Mr. Rosengren insists that the “Federal Reserve is going to continue to do what it needs to try to get – get us back to full employment as quickly as possible,” and the Federal open Market Committee (FOMC) may stick to a dovish forward guidance at the next interest rate decision on June 10 even though the balance sheet climbs above $7 trillion in May.

Image of Federal Reserve balance sheet

Source: FOMC

It remains to be seen if the FOMC will deploy more unconventional tools in 2020 as Chairman Jerome Powelltames speculation for a negative interest rate policy (NIRP), but the low interest rate environment along with the ballooning central bank balance sheets may act as a backstop for goldas marketparticipants look for an alternative to fiat-currencies.

With that said, the price for gold may continue to exhibit a bullish behavior in June as it trades to fresh yearly highs during every single month so far in 2020, but the precious metal may consolidate over the remainder of the month as the Relative Strength Index (RSI) reverses course ahead of overbought territory and establishes a negative slope.

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