- Gold price remains on the defensive amid the US stimulus-led rally in Treasury yields.
- US dollar benefits from higher yields as the market turns cautious.
- US Core PCE Price Index to determine gold’s next direction.
Gold price (XAU/USD) finished Thursday almost unchanged around $1896, unable to resist above the $1900 mark. Gold price breached the key $1891 support after the 10-year Treasury yields advanced through 1.60% on the New York Times report that US President Joe Biden is pushing for $6 trillion in spending for the 2022 fiscal year. This came a day before the White House’s budget proposal. The greenback also drew support from upbeat US data. However, hopes for the US stimulus drove the Wall Street rally, which kept the dollar’s gains in check, helping gold stage a modest rebound. Gold price also recovered amid increased buying support from China and India. Meanwhile, rising inflation expectations continue to boost gold’s appeal as a hedge against inflation.
This Friday, all eyes remain on the critical US Core Personal Consumption Expenditure (PCE) Price Index release, the Fed’s preferred inflation measure, which excludes volatile items such as energy and food prices. Gold’s fate hinges on the outcome of US PCE data, as a faster-than-expected increase in the price pressures could add fuel to the Fed’s tapering expectations, sending the yields and the dollar northwards and vice-versa. The Fed policymakers have recently revived calls for taper talks, dismissing rising inflation concerns. The US Core PCE is seen higher by 2.9% YoY in April vs. +1.8% booked previously. Meanwhile, Biden’s budget and month-end flows will also have a major influence on gold price.
Gold Price Chart - Technical outlook
Gold: Daily chart
Upbeat US PCE inflation report is likely to trigger an extension of the correction from multi-month highs, with strong support seen around $1870 levels. A breach of the latter could expose the $1845 cushion, the confluence of the 21 and 200-daily moving averages (DMA).
The Relative Strength Index (RSI) remains within the overbought territory, keeping gold price at an imminent risk of decline, which could likely get compounded due to the effect of strong inflation figures.
However, the losses may remain capped by a bull cross confirmed on the daily chart after the 21-DMA pierced through the 200-DMA from below.
If the data fall short of expectations, the price could rebound towards May 26 highs of $1913, above which the January high of $1918 could get tested. The next upside target is seen at $1930, the round number.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD edges lower toward 1.0700 post-US PCE
EUR/USD stays under modest bearish pressure but manages to hold above 1.0700 in the American session on Friday. The US Dollar (USD) gathers strength against its rivals after the stronger-than-forecast PCE inflation data, not allowing the pair to gain traction.
GBP/USD retreats to 1.2500 on renewed USD strength
GBP/USD lost its traction and turned negative on the day near 1.2500. Following the stronger-than-expected PCE inflation readings from the US, the USD stays resilient and makes it difficult for the pair to gather recovery momentum.
Gold struggles to hold above $2,350 following US inflation
Gold turned south and declined toward $2,340, erasing a large portion of its daily gains, as the USD benefited from PCE inflation data. The benchmark 10-year US yield, however, stays in negative territory and helps XAU/USD limit its losses.
Bitcoin Weekly Forecast: BTC’s next breakout could propel it to $80,000 Premium
Bitcoin’s recent price consolidation could be nearing its end as technical indicators and on-chain metrics suggest a potential upward breakout. However, this move would not be straightforward and could punish impatient investors.
Week ahead – Hawkish risk as Fed and NFP on tap, Eurozone data eyed too
Fed meets on Wednesday as US inflation stays elevated. Will Friday’s jobs report bring relief or more angst for the markets? Eurozone flash GDP and CPI numbers in focus for the Euro.