Gold Price Analysis: XAU/USD bulls banking on daily continuation, eyes on US PCE data

Update: Gold (XAU/USD) could be the precious metals markets linchpin in an otherwise unforgiving environment where the US dollar is creeping higher from out of the daily lows as marked in the DXY in recent days.

At the time of writing, the US dollar is creeping higher from a low of 90.0110 to a high of 90.0980 while the price of gold is trading down sone 0.11% on the day, slipping below the hourly 10 EMA from a high of $1,898.61 to print $1,894.06 the low for the day so far. However, from

a daily perspective, the emphasis on the upside following what appears to be a meanwhile and healthy correction in an otherwise strongly bullish environment. The gold to silver ratio demonstrates just how dominant gold has been for the precious metals for the month of May, with the ratio rising 5.27%. If this is a trend that continues, silver could well benefit from continued demand for gold in the days to come. Meanwhile, all eyes will turn to the forthcoming inflation data from the US as the next likely catalyst ( see below) before the long weekend and month-end finale.

The XAU/USD pair reached its highest level since early January at $1,912 on Wednesday but ended up closing the day in the negative territory below $1,900 pressured by rising US Treasury bond yields. With the T-bond yields extending the rebound into the second straight day on Thursday, gold's correction continued and XAU/USD was last seen losing 0.3% on the day at $1,890.

Focus shifts to US PCE inflation data

Earlier in the day, the US Bureau of Economic Analysis (BEA) reported that it left the annualized first-quarter real Gross Domestic Product (GDP) growth unchanged at 6.4% in its second estimate. This reading missed the market expectation of 6.5% but failed to trigger a noticeable market reaction.

Other data from the US showed that Durable Goods Orders declined by 1.3% in April, falling short of analysts' estimate for an increase of 0.7%, and the weekly Initial Jobless Claims declined to its lowest level in more than a year at 406,000.

With market participants largely ignoring the mixed US data, the benchmark 10-year US T-bond yield, which gained 1.5% on Wednesday, preserved its bullish momentum and is currently rising 2.15% at 1.617%. Meanwhile, the US Dollar Index is staying relatively quiet above 90.00 during the American trading hours.

On Friday, the BEA will release the Personal Consumption Expenditures (PCE) Price Index, the Fed's preferred gauge of inflation, data alongside the Personal Spending and Personal Income figures for April. Earlier in the month, the stronger-than-expected April CPI print caused XAU/USD to lose 1% on the day of the publication and a similar market reaction could be expected if the PCE inflation surpasses analysts' estimates. On a yearly basis, the Core PCE Price Index is expected to rise to  2.9% from 1.8% in March.

Moreover, some profit-taking could be in the books on the last Friday of the month and cause gold's correction to deepen ahead of the weekend.

On the other hand, a decisive break above $1,900 on a soft PCE inflation reading could attract buyers and help gold end the week on a firm footing.

Previous Updates

Update: Gold (XAU/USD) eases from $1,900 to $1,897 during the initial Asian session trading on Friday. In doing so, the gold traders struggle for fresh clues ahead of the key US inflation data release amid mixed catalysts and a light calendar in Asia.

On Thursday, US President Joe Biden’s $6.0 trillion budget proposal, teased by the New York Times (NYT), as well as comments from Treasury Secretary Janet Yellen’s rejection of reflation fears, propelled the Treasury yields. However, wait for today’s US Core Personal Consumption Expenditure (PCE) Price Index for April tamed the risk-on mood. Also on the negative side was the return of the US-China trade tussles and Republicans counteroffer on the budget proposal of less than $1.0 trillion.

Given the market’s indecisive nature, gold prices may witness multiple hurdles to the north unless the scheduled US data backs receding inflation fears.

Technical levels to watch for