Gold price consolidates the downside as focus shifts to US PCE inflation

Most recent article: Gold bounces off $2,300 after traders take profit

• Gold price attempts a minor recovery from a two-week low set on Wednesday.
• The Fed’s hawkish stance, higher US bond yields, and recent USD strength have acted as a headwind.
• Geopolitical tensions and political uncertainty help limit the downside for the safe-haven metal.

Gold price (XAU/USD) holds near two-week lows, strugging to register any meaningful recovery while trading around the $2,300 mark in the European session on Thursday. The Federal Reserve (Fed) adopted a more hawkish stance at the end of the June meeting. Furthermore, policymakers continue to argue in favor of only one interest rate cut by the end of this year. This remains supportive of elevated US Treasury bond yields and turns out to be a key factor acting as a headwind for the non-yielding yellow metal. 

That said, signs of easing inflationary pressures in the US keep bets for a September interest rate cut by the Fed on the table and fail to assist the US Dollar (USD) to capitalize on the previous day's strong move up to a nearly two-month peak. This, along with a softer tone around the equity markets, persistent geopolitical tensions and political uncertainty lend some support to the safe-haven Gold price. Traders also seem reluctant ahead of the key US macro data, with the focus squarely on the US Personal Consumption Expenditures (PCE) Price Index on Friday.

Daily Digest Market Movers: Gold price struggles amid Fed  rate-cut uncertainty

• The Federal Reserve's higher-for-longer interest rates narrative remains supportive of elevated US Treasury bond yields and a bullish US Dollar, which undermines the non-yielding Gold price.
• A government report published on Wednesday showed that New Home Sales registered the steepest decline since September 2022 and plunged 11.3% in May to 619K, or the lowest level since November.
• The USD bulls, however, seem rather unaffected by the data, which added to the evidence that the world's largest economy is slowing down amid the recent signs of easing inflationary pressures. 
• The Fed projected only one rate cut in 2024, though the markets are still pricing in a greater chance of the first rate cut by the Fed in September and about two 25 basis points cuts by the year-end. 
• The uncertainty over the likely timing and the number of Fed rate cuts this year keeps a lid on any further USD appreciation and lends support to the XAU/USD amid persistent geopolitical tensions.
• Traders also seem reluctant ahead of the US presidential debate and the release of the US Personal Consumption Expenditures (PCE) Price Index – the Fed's preferred inflation gauge – on Friday.
• Heading into the key data risk, Thursday's US macro data – the final Q1 GDP print, Durable Goods Orders, Initial Weekly Jobless Claims, and Pending Home Sales – might provide some impetus.

Technical Analysis: Gold price manages to hold above $2,285 support, not out of the woods yet

From a technical perspective, the recent failure to build on the momentum beyond the 50-day Simple Moving Average (SMA) and the subsequent downfall favors bearish traders. Moreover, the overnight breakdown through a short-term ascending trend-line support near the $2,314 area validates the near-term negative outlook. Given that oscillators on the daily chart have been gaining negative traction, some follow-through selling below the $2,285 horizontal support has the potential to drag the Gold price to the 100-day SMA support near the $2,250 area. The downward trajectory could extend further towards the $2,225-2,220 region before the XAU/USD eventually drops to the $2,200 round-figure mark.

On the flip side, any attempted recovery now seems to face resistance near the $2,314-2,315 support breakpoint. A sustained strength beyond might trigger a short-covering rally, though is likely to remain capped near the 50-day SMA, currently pegged near the $2,338-2,340 region. The subsequent move-up could lift the Gold price back to the $2,360-2,365 supply zone, which, if cleared decisively, will negate any near-term negative bias. Bullish traders might then aim to reclaim the $2,400 round-figure mark and challenge the all-time peak, around the $2,450 area touched in May.