Gold price bulls remain on the sidelines ahead of the crucial US PCE Price Index data

Haresh Menghani FXStreet

Most recent article: Gold bounces at 50-day SMA, finding its feet after US GDP-inspired sell-off

Gold price dived to over a two-week low following the release of the US macro data on Thursday.
September Fed rate cut bets keep the USD bulls on the defensive and help to limit any further losses.
Traders now look to the US PCE Price Index data before positioning for a firm near-term direction.

Gold price (XAU/USD) gains some positive traction during the Asian session on Friday and for now, seems to have snapped a two-day losing streak, to over a two-week low touched the previous day in reaction to the upbeat US macro data. The better-than-expected Advance US Gross Domestic Product (GDP) print released on Thursday was consistent with the view that the economy was holding up well. Additional details revealed that inflation slowed during the second quarter of 2024 and infused some stability in the financial markets, which, in turn, drove flows away from the traditional safe-haven precious metal.

The XAU/USD, however, showed some resilience below the 50-day Simple Moving Average (SMA) amid expectations that the Federal Reserve (Fed) will start its rate-cutting cycle in September. This keeps the US Dollar (USD) depressed below a two-week high touched on Wednesday and assists the Gold price to attract some buyers. Meanwhile, the upside seems limited as traders prefer to wait for the release of the US Personal Consumption Expenditures (PCE) Price Index later this Friday for cues about the Fed's policy path. This will drive the USD demand and provide a fresh impetus to the non-yielding yellow metal.

Daily Digest Market Movers: Gold price struggles to build on modest uptick as traders await US PCE Price Index

The US Bureau of Economic Analysis reported on Thursday that the economy grew at a 2.8% annualized pace during the April-June period as compared to the 1.4% rise in the previous quarter and 2% anticipated.
Further details revealed that the core Personal Consumption Expenditures Price Index – the Federal Reserve's preferred inflation gauge – decelerated to 2.9% from the 3.7% increase registered in the first quarter.
Separately, data published by the US Department of Labor (DoL) showed that the number of individuals who filed for unemployment insurance benefits fell more-than-expected, to 235K in the week ending July 20.
Investors cheered the US economic resilience and dented demand for traditional safe-haven assets, which, in turn, exerted heavy downward pressure on the Gold price and dragged it to the lowest level since June 9.
The markets, meanwhile, have fully priced in a September Fed rate cut move and anticipate two more rate cuts by year-end, keeping the US Dollar on the defensive and lending support to the non-yielding yellow metal.
Traders now look forward to the release of the June US PCE Price Index for more cues about the Fed's policy/rate-cut path before determining and positioning for the next leg of a directional move for the XAU/USD.

Technical Analysis: Gold price could accelerate the slide once the 50-day SMA, support is broken decisively

From a technical perspective, the Gold price showed some resilience below the 50-day Simple Moving Average (SMA) for the second straight day on Friday and for now, seems to have snapped a two-day losing streak. Hence, some follow-through selling below the overnight swing low, around the $2,353 area, is needed to support prospects for an extension of the recent corrective decline from the all-time peak touched last week.

Meanwhile, oscillators on the daily chart have just started gaining negative traction, suggesting that the path of least resistance for the XAU/USD is to the downside and that any further recovery is likely to attract fresh sellers near the $2,380 region. The next relevant hurdle is pegged near the $2,391-2,392 zone ahead of the $2,400 mark, above which a fresh bout of a short-covering should lift the metal towards the weekly top, around the $2,432 region.

On the flip side, acceptance below the 50-day SMA and a subsequent break through the $2,350 support, will be seen as a fresh trigger for bearish traders. The Gold price might then aim to challenge the 100-day SMA, currently pegged near the $2,325-2,324 region. The latter should act as a key pivotal point, which if broken should pave the way for a slide towards testing sub-$2,300 levels, or June monthly swing lows.

Economic Indicator

Personal Consumption Expenditures - Price Index (YoY)

The 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 YoY reading compares prices in the reference month to a year earlier. Price changes may cause consumers to switch from buying one good to another and the PCE Deflator can account for such substitutions. This makes it the preferred measure of inflation for the Federal Reserve. Generally, a high reading is bullish for the US Dollar (USD), while a low reading is bearish.

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