Gold price forecast: US GDP seems to have opened doors for $1,300

Gold (XAU/USD) is set to end the week on a positive note with 0.86% gains and could test the psychological resistance of $1,300 in the short-term.

The safe haven yellow metal remained under pressure in the first half of the week, hitting a low of $1,266 on Wednesday, as investors snapped up US Dollars, pricing in the possibility of a big beat on the first quarter growth figure, as suggested by the widely-tracked Atlanta Fed’s GDPNow tracker. 

The headline figure released at 12:30 GMT today did beat consensus estimates with a big margin by printing at 3.2% – well above the Atlanta Fed’s 2.7% projection.  

The details of the GDP report, however, revealed that higher inventories, especially in the manufacturing sector and increased spending from local and state governments pushed the growth rate higher. 

The drop in imports also played a role. However, consumer spending – the main engine of the US economy – slowed, while the Core Personal Consumption Expenditures, a key metric that excludes the volatile food and energy component, roising 1.3% quarter-on-quarter, missing the expected rise of 1.6% and having registered a growth of 1.8% in the final three months of 2018. 

While the headline figure blew past expectations, details of the report show the economy is on track towards a deeper slowdown in the coming quarters. 

Notably, the inventory buildup, which pushed the growth rate higher in the first quarter, will likely act as a drag over the coming quarters. Further, government spending may taper off, pushing growth lower.

Hence, many analysts are of the opinion that the strong headline figure would not affect the Fed’s plans to maintain the status quo for the rest of 2019.  

As a result, the US Dollar could remain under pressure next week, having slipped lower across the board following the key US data releases today. Thus, the path of least resistance for Gold is to the downside. 

At press time, Gold is trading at $1,286 per Oz, having hit a low of $1,266 on Wednesday. 

Weekly chart

The big green weekly candle with a notably lower wick has neutralized the bearish view put forward by the gravestone doji candle created during in the first week of the current month and with the 14-day relative strength index (RSI) reporting a falling wedge breakout, prices could rise to $1,300 in the coming week. 

Gains above $1,300, however, could be short-lived, as the bearish or downward sloping 10-week MA will be located at $1,296 next week. 

A potential rejection at the 10-week MA would reinforce the bearish view put forward by that downward sloping average could fuel a fall back to lows near $1,266. 

Technical Levels