- Gold price attracts some sellers and erodes a part of Thursday’s recovery from a two-week low.
- The USD advances to a fresh two-month high and exerts downward pressure on the commodity.
- Traders, however, seem reluctant to place directional bets ahead of the key US PCE Price Index.
Gold price (XAU/USD) struggles to capitalize on the previous day’s goodish bounce of over 1% from a two-week low and meets with a fresh supply during the Asian session on Friday. The US Dollar (USD) regains positive traction and jumps to a fresh two-month peak, which, in turn, is seen as a key factor undermining the commodity. The downside for the precious metal, however, remains limited amid expectations that the Federal Reserve (Fed) will start cutting interest rates later this year. Apart from this, geopolitical tensions in the Middle East and the protracted Russia-Ukraine act as a tailwind for the safe-haven XAU/USD.
Bearish traders also seem reluctant to place aggressive directional bets and prefer to wait on the sidelines ahead of the release of the US Personal Consumption Expenditures (PCE) Price Index later during the early North American session. The crucial inflation data will influence market expectations about the Fed’s future policy decisions and rate-cut path, which, in turn, should help determine the near-term trajectory for the non-yielding Gold price. Heading into the key data risk, the XAU/USD remains confined in a multi-week-old trading range and below the 50-day Simple Moving Average (SMA) pivotal resistance.
Daily Digest Market Movers: Gold price remains on the defensive as traders await more cues about Fed’s rate-cut path
- The softer US macro data published on Thursday lifted bets for an imminent start of the Federal Reserve’s rate-cutting cycle this year and triggered a short-covering rally around the Gold price.
- The real US GDP growth for the first quarter was revised up to 1.4% annualized pace, though it marked the slowest rise since spring 2022 and confirmed a sharp slowdown from 3.4% in the previous quarter.
- The US Census Bureau reported that Durable Goods Orders increased by 0.1% in May as compared to a 0.1% fall anticipated and the 0.6% growth (revised from +0.7%) recorded in the previous month.
- Separately, the Labor Department said that Initial Jobless Claims fell to 233,000 in the week ended June 22, but the four-week moving average rose to 236,000, or the highest level since last September.
- Furthermore, US Pending Home Sales – a forward-looking indicator of home sales based on contract signings– unexpectedly decreased by 2.1% in May, to the lowest level on record going back to 2001.
- This comes on top of tepid US Retail Sales figures for May and signs that inflation is subsiding, which, in turn, should allow the Fed to lower borrowing costs as early as the September policy meeting.
- The US Dollar, however, found some support from comments by Fed Governor Michelle Bowman, saying that we are not at a point yet to consider a rate cut as the upside risks to inflation persist.
- This, in turn, exerts some pressure on the XAU/USD ahead of the release of the US Personal Consumption Expenditures (PCE) Price Index – the Fed’s preferred inflation gauge – later this Friday.
Technical Analysis: Gold price seems vulnerable while below 50-day SMA, $2,285 support holds the key for bulls
From a technical perspective, the overnight positive move stalled ahead of the 50-day Simple Moving Average (SMA) support breakpoint, now turned resistance. The said barrier is currently pegged near the $2,337-2,338 region, which should now act as a key pivotal point. A sustained strength beyond has the potential to lift the Gold price back towards the $2,360-2,365 supply zone. Some follow-through buying will negate any near-term negative bias and allow bulls to reclaim the $2,400 round-figure mark. The momentum could extend further towards challenging the all-time peak, around the $2,450 area touched in May.
On the flip side, the $2,300 round-figure mark is likely to protect the immediate downside ahead of the $2,285 horizontal support. A convincing break below the latter will be seen as a fresh trigger for bearish traders and drag the Gold price to the 100-day SMA, currently near the $2,250 area. The XAU/USD could eventually drop to the $2,225-2,220 region en route to the $2,200 round-figure mark.