Gold Price Forecast: XAU/USD re-attempts $1780 as US dollar slips, PCE inflation eyed

Update: Gold price is making another recovery attempt towards the $1790-$1795 supply zone, finding its feet amid a subdued US dollar across the board and mixed Asian equities. Despite a minor bid, gold price continues to trade within familiar levels amid mixed signals from the Fed on interest rate hikes and a slew of downbeat US economic data. The risks remain titled to the downside for gold price, given that a death cross is confirmed on the daily chart. Meanwhile, 100-Daily Moving Average (DMA) at $1793 remains a tough nut to crack for the gold bulls.

Attention now turns towards the critical US PCE inflation data, which is likely to back the Fed’s hawkish turn. Also, US stimulus updates will be closely followed.

Read: US May PCE inflation preview: Data likely to reaffirm FOMC's hawkish tilt

Gold gained traction during the European trading hours on Thursday and advanced to a daily high of $1,788 before reversing its direction in the second half of the day. As of writing, XAU/USD was down 0.2% on a daily basis at $1,775.

Following the mixed macroeconomic data releases from the US, the greenback remained resilient against its rivals and the US Dollar Index extended its sideways grind below 92.00.

Meanwhile, the S&P 500 Index notched a new all-time high after the opening bell and made it difficult for the USD to attract investors as a safe haven. US President Joe Biden announced on Thursday that they have reached a deal on the infrastructure spending plan following a meeting with a bipartisan group of senators. Moreover, Republican US Senator Portman said that the infrastructure deal will not include new taxes.

In its final estimate, the US Bureau of Economic Analysis (BEA) left the annualized first-quarter real GDP growth unchanged at 6.4% as expected. Additionally, the US Census Bureau reported that Durable Goods Orders rose by 2.3%, or $5.7 billion, to $253.5 billion in May, falling short of the market expectation for an increase of 2.7%. Finally, the weekly Initial Jobless Claims edged lower to 411,000 from 418,000. 

On Friday, the BEA will release the May PCE inflation report and a significant market reaction could cause XAU/USD to break out of its weekly range. Earlier in the session, St. Louis Fed President James Bullard that inflation could be even stronger than expected and added that policymakers need to account for new inflation risks in the coming months. A stronger-than-expected PCE Price Index reading could allow the greenback to finish the week on a firm footing and vice versa.

US May PCE inflation preview: Data likely to reaffirm FOMC's hawkish tilt.

Gold technical outlook

Following Thursday's choppy action, gold's near-term technical outlook remains bearish with key levels remaining intact. On the daily chart, the Relative Strength Index (RSI) continues to move a little above 30, confirming the view that buyers are not yet interested in the precious metal.

On the downside, $1,770 (Fibonacci 61.8% retracement of April-June uptrend) aligns as key support ahead of $1,756 (April 29 low, static level) and $1,745 (static level). Resistances, on the other hand, could be seen at $1,795/$1,800 (psychological level, 100-day SMA, Fibonacci 50% retracement), $1,825 (Fibonacci 38.2% retracement) and $1,835 (200-day SMA).

Previous updates

Update: Gold (XAU/USD) pares the previous day’s losses to $1,777 amid a quiet market session and mixed catalysts for Friday’s early Asian session. The quote’s latest run-up could be linked to the news suggesting the Fed’s removal of pandemic-led restrictions on the large US banks. Earlier on Thursday, headlines concerning US President Joe Biden’s infrastructure deal and softer data at home, negated tapering fears, improved market sentiment and weighed on the gold prices.

It’s worth noting that technical pullback from 100-DMA and the month-end, as well as quarter-end, moves suggest further weakness of the yellow metal. However, risk catalysts and US Core Personal Consumption Expenditure (PCE) data may offer intermediate moves during a likely dull day.

Additional levels to watch for