Gold Price Analysis: XAU/USD at risk of decline on strong US PCE inflation figures

Gold price remains on the defensive amid the US stimulus-led rally in Treasury yields. This Friday, US Core PCE Price Index is set to determine gold’s next direction, FXStreet’s Dhwani Mehta briefs.

See – Gold Price Analysis: XAU/USD to reach the $2075 record high on a break above $1959/66 – Credit Suisse

US PCE inflation holds the key

“This Friday, all eyes remain on the critical US Core Personal Consumption Expenditure (PCE) Price Index release, the Fed’s preferred inflation measure. 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 US Core PCE is seen higher by 2.9% YoY in April vs. +1.8% booked previously.” 

“Biden’s budget and month-end flows will also have a major influence on the yellow metal.”

“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).”

“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.”