Gold touches down on 50-day SMA, finding a floor after US GDP-inspired sell-off


  • Gold is bouncing off support from a major Moving Average after an over 1.0% fall. 
  • Traders now await the Federal Reserve’s preferred inflation gauge for more guidance on Friday. 
  • A lower-than-expected result could see Gold rebound; the opposite for a higher-than-forecast reading. 

Gold trades in the $2,370s per ounce on Friday after recovering from the 50-day Simple Moving Average (SMA), as technical traders scalp the bounce after the steep drop of the previous day. Gold sold off by over 1.0% on Thursday as it ran with the commodity pack lower, which declined as a group on global growth fears. 

Gold may be moved by Fed’s favorite inflation gauge

Gold could see more volatility on Friday after the release of June’s core Personal Consumption Expenditures (PCE) Price Index in the US, the Federal Reserve's preferred gauge of inflation. The data could further tone the outlook for interest rates in the US, which could impact the yellow metal. 

The Fed is currently expected to cut interest rates by 0.25% in September, reducing them from an upper band of 5.50% to 5.25%. Two more 0.25% cuts are also seen as more than 50% likely before the end of the year, according to the CME FedWatch tool. The core PCE's last reading was 2.6% year-over-year in May, now economists expect it to fall to 2.5% in June as it edges ever closer to the Fed’s 2.0% target level. A deeper-than-expected decline would increase the probability of the Fed making further cuts to interest rates after September; the opposite is true of a higher-than-forecast result. 

Overweight long-positioning and Asian demand stutters – TD Securities 

Gold will probably continue to face pressure from the effects of overweight long-positioning and a fall in Asian demand, according to analysts at TD Securities. An imbalance of long positions that built up in the precious metal usually foreshadows a sell-off as markets rebalance, which appears to be the case with Gold. 

"Macro trader positioning remains larger than warranted by rates markets' expectations for Fed cuts alone, with signs the Trump trade had contributed to some froth. Signs of a buyer's strike in Asia also emerged, as highlighted by the significant deterioration in the SGE premium and by nascent signs of liquidations from Shanghai's top precious metals traders," says  Daniel Ghali, Senior Commodity Strategist at TD Securties. 

Demand from Asian central banks, hoarding Gold to hedge against currency depreciation against the US Dollar (USD), has fallen due the recent weakening of USD and the appreciation of their own domestic currencies. 

"Significant liquidations from SHFE (Shanghai Futures Exchange) Gold and Silver traders are now reinforcing the downside in price action, with more than 5t and 6.6m toz of notional sold over the last session alone. After all, if precious metal holdings were a hedge against Asian currency pressures, than the recent strength in Asian currencies is now playing in favor of continued downside," says Ghali. 

Technical Analysis: Gold finds support at 50-day SMA

Gold continues unfolding a new down leg within the widening range it has formed since May. It is in a sideways rather than directional market trend, which, given “the trend is your friend,” is likely to continue. 

The down leg has met support at the 50-day SMA at $2,360 and bounced slightly. If it closes below the SMA, it will probably extend its decline to the next support level at the base of the widening range and the 100-day SMA at circa $2,320. 

XAU/USD Daily Chart

The fact that the Moving Average Convergence Divergence (MACD) indicator has crossed below its signal line adds further bearish confirmation to the downward move currently unfolding. MACD tends to work particularly well at signaling price turns in sideways markets. 

A break above the $2,483 all-time high would indicate the establishment of a higher high and suggest the possibility of a breakout to the upside and an extension of the longer-term uptrend. 

Such a move might unlock Gold’s next upside target at roughly $2,555-$2,560, calculated by extrapolating the 0.618 Fibonacci ratio of the height of the range higher. 

Economic Indicator

Core Personal Consumption Expenditures - Price Index (YoY)

The Core Personal Consumption Expenditures (PCE), released by the US Bureau of Economic Analysis on a monthly basis, measures the changes in the prices of goods and services purchased by consumers in the United States (US). The PCE Price Index is also the Federal Reserve’s (Fed) preferred gauge of inflation. The YoY reading compares the prices of goods in the reference month to the same month a year earlier. The core reading excludes the so-called more volatile food and energy components to give a more accurate measurement of price pressures." Generally, a high reading is bullish for the US Dollar (USD), while a low reading is bearish.

Read more.

Next release: Fri Jul 26, 2024 12:30

Frequency: Monthly

Consensus: 2.5%

Previous: 2.6%

Source: US Bureau of Economic Analysis

After publishing the GDP report, the US Bureau of Economic Analysis releases the Personal Consumption Expenditures (PCE) Price Index data alongside the monthly changes in Personal Spending and Personal Income. FOMC policymakers use the annual Core PCE Price Index, which excludes volatile food and energy prices, as their primary gauge of inflation. A stronger-than-expected reading could help the USD outperform its rivals as it would hint at a possible hawkish shift in the Fed’s forward guidance and vice versa.

 

Share: Feed news

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.

Trading Pro
Read review
Pepperstone
Read review
Trading Pro
Read review
Pepperstone
Read review
Trading Pro
Read review
Pepperstone
Read review
XM
Read review
Moneta Markets
Read review
XM
Read review
Moneta Markets
Read review

Recommended content


Recommended content

Editors’ Picks

EUR/USD erases gains to trade near 1.1050 ahead of US NFP, Powell

EUR/USD erases gains to trade near 1.1050 ahead of US NFP, Powell

EUR/USD has erased gains to trade neutral near 1.1050 in the European session on Friday. The US Dollar breathes a sigh of relief after the trade war and recession fears-led sell-off, weighing on the pair. Traders look to the US NFP report and Fed Chair Powell's speech for fresh directives.  

EUR/USD News
GBP/USD returns to the red near 1.3050 as US NFP data looms

GBP/USD returns to the red near 1.3050 as US NFP data looms

GBP/USD is under heavy selling pressure near 1.3050 in European trading on Friday. Traders resort to profit-taking on their US Dollar short positiions, adjusting ahead of the critical US Nonfarm Payrolls data and Fed Chair Powell speech. 

GBP/USD News
Gold price sticks to negative bias around $3,100; bears seem non-committed ahead of US NFP report

Gold price sticks to negative bias around $3,100; bears seem non-committed ahead of US NFP report

Gold price meets with a fresh supply on Friday, though the downside potential seems limited. Trump’s tariffs-inspired risk-off mood might continue to act as a tailwind for the precious metal. Fed rate cut bets weigh on the USD and also contribute to limiting losses for the XAU/USD pair.

Gold News
XRP finds new lifeline as Coinbase Derivatives eyes XRP futures on April 21

XRP finds new lifeline as Coinbase Derivatives eyes XRP futures on April 21

Ripple price reclaims the $2.00 support level and trades at $2.06 at the time of writing on Friday in the wake of a drawdown to $1.96 during Thursday’s session. Traders continue to exercise caution after Trump’s tariffs hit 100 countries, as per a CryptoQuant report.

Read more
Trump’s “Liberation Day” tariffs on the way

Trump’s “Liberation Day” tariffs on the way

United States (US) President Donald Trump’s self-styled “Liberation Day” has finally arrived. After four straight failures to kick off Donald Trump’s “day one” tariffs that were supposed to be implemented when President Trump assumed office 72 days ago, Trump’s team is slated to finally unveil a sweeping, lopsided package of “reciprocal” tariffs. 

Read more
The Best brokers to trade EUR/USD

The Best brokers to trade EUR/USD

SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.

Read More

Forex MAJORS

Cryptocurrencies

Signatures

Best Brokers of 2025