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Gold Price Forecast: XAU/USD needs acceptance above $1,993 for further upside, United States PCE eyed

  • Gold price building on the previous rebound ahead of the United States PCE inflation data.
  • Sell-off in the US Dollar and US Treasury yields weighed on the Gold price on Thursday.
  • Gold price bounced off key support in a pennant formation, resistance at $1,993 holds the key.

Gold price is defending minor bids so far this Friday, gathering pace for the next push higher toward the $2,000 threshold. The renewed upside in the Gold price can be attributed to the broad-based United States Dollar weakness and sluggish performance in the US Treasury yields, as investors now await the US Federal Reserve’s (Fed) preferred inflation gauge on Friday for fresh trading impetus.

Federal Reserve’s favorite inflation data in focus

After Thursday’s weekly Jobless Claims and Q4 final Gross Domestic Product (GDP) from the United States exerted additional downside pressure on the US Dollar, the greenback is licking its wounds early Friday, allowing Gold price to sustain at higher levels.

The United States Commerce Department reported that real GDP increased annually by 2.6% during the fourth quarter of 2022, a downward revision from the 2.7% forecast last month. The decline was partly driven by decreasing consumer spending. Meanwhile, US Jobless Claims for the week ended March 25 totaled 198,000, up 7,000 from the previous period and a bit higher than the 196,000 estimate.

The downbeat United States economic data releases added to the dovish Federal Reserve interest rates outlook, accentuating the renewed weakness in the US Dollar alongside the US Treasury bond yields. The benchmark 10-year US Treasury bond yields dropped over 6 basis points (bps) to test the 3.50% support level once again.

At the time of writing, the US Treasury bond yields are attempting a minor bounce, tracking the upbeat mood on the Asian indices. Meanwhile, traders refrain from placing any fresh bets on the Gold price ahead of the Fed’s preferred inflation gauge, the Core Personal Consumption Expenditures - Price Index. The measure is expected to hold steady at 4.7% YoY in February, although any upside surprise could bolster expectations of a 25 bps Fed rate hike next month, which could render Gold price negative.

However, the reaction to the US PCE inflation data could be also affected by the month-end, as well as, the fiscal year-end flows, which could overwhelm investors. The US Dollar, therefore, could see a fresh upswing on USD shorts unwinding.

Germany’s inflation data boosts the Euro and Gold price

Gold price received an additional boost from a fresh rally in the EUR/USD pair. Hotter-than-expected German Harmonized Index of Consumer Prices (HICP) supported the case for more European Central Bank (ECB) rate hikes ahead, eventually offering the much-needed boost to the Euro. The EUR/USD surge exacerbated the pain in the US Dollar, boding well for the USD-denominated Gold price. Germany’s Consumer prices increased 7.4% YoY in March but this was notably weaker than the 8.7% increase registered in February. The index was expected to climb 7.3% in March. The Euro traders, however, shrugged off the softer Spanish HICP data.    

Gold price technical analysis: Daily chart

As observed on the daily sticks, Gold price rebounded sharply from the critical rising trendline support, then at $1,953, on Thursday.

The 14-day Relative Strength Index (RSI) is trading listlessly but well above the midline, suggesting that the bullish momentum in Gold price remains intact.

Should the rebound pick up steam, Gold price could aim to take out the falling trendline resistance at $1,993. A daily closing above the latter is needed to confirm an upside break from a pennant formation.

Doors will then open up for a test of the $2,000 mark, above which the yearly high at $2,010 will be threatened. The next relevant upside target for Gold bulls is seen at the $2,050 psychological level.

On the flip side, failure to sustain the renewed upside will trigger a fresh decline toward the abovementioned strong trendline support, now at $1,959.

A sustained break below the latter will validate a pennant breakdown, exposing the $1,950 round level.

Gold sellers will then target the previous week’s low at $1,935 should the downside momentum accelerate.

Author

Dhwani Mehta

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

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