Gold prices, shown as XAU/USD, rose for the second day in a row on Friday. They reached $2,350, which is the highest level in several days, especially during the morning in Europe. The US Dollar, known as USD, continued its recent trend of weakening, partly due to lower GDP numbers from the previous day. This weakening dollar helped push gold prices higher. However, despite these gains, gold hasn’t seen a significant increase lately, mostly because people still expect the Federal Reserve, or Fed, to take actions that might not favor gold prices.
On Thursday, the US Commerce Department released data showing that inflation, which is the general rise in prices, increased more than experts predicted in the first quarter of the year. This news made people more confident that the Federal Reserve, the central bank of the US, won’t reduce interest rates anytime soon. When interest rates stay higher, the returns on US Treasury bonds also stay higher, making them more appealing to investors. This tends to make the US dollar stronger.
Additionally, there’s a positive vibe in the market right now, meaning people are feeling optimistic about the economy. When this happens, investors are less likely to put their money into safe-haven assets like gold. All these factors combined might limit how much gold prices can increase before the release of the US Personal Consumption Expenditures (PCE) Price Index.
Daily Market Movers Recap: Gold Price May Encounter Hurdles Amid Anticipation of Key US Inflation Data
- The US GDP report released on Thursday indicated a significant slowdown in economic growth and persistent inflation, supporting the price of gold.
- Data from the US Commerce Department showed that the largest economy in the world expanded by only 1.6% annually in the first quarter, the slowest growth rate since mid-2022.
- Additionally, underlying inflation exceeded expectations, reaching 3.7% in the first quarter, reinforcing expectations that the Federal Reserve will maintain higher interest rates for a longer period.
- In response to the mixed economic data, the yield on the 10-year US government bond surged to its highest level in over five months, creating headwinds for gold, which doesn’t offer interest.
- Furthermore, reduced concerns about worsening geopolitical tensions in the Middle East decreased demand for gold as a safe-haven asset, limiting its potential price increase.
- On the other hand, investors focused on the future path of Federal Reserve interest rate cuts, awaiting cues from the release of the Personal Consumption Expenditures (PCE) Price Index.
- The upcoming inflation data is crucial in shaping the Fed’s future policy decisions and influencing demand for the US dollar, which, in turn, impacts the short-term direction of gold prices.
Technical Outlook: Gold Price Set to Challenge Key Resistance Level around $2,371-2,372 Range
In simpler terms, the XAU/USD, which represents gold prices, has been facing difficulty crossing a line on the daily chart called the 100-period Simple Moving Average (SMA). This line is currently around the $2,345 mark and is an important point to watch. Some indicators on the daily chart are showing mixed signals.
If gold manages to break through this barrier and stays strong, it could signal a good opportunity for traders who bet on prices going up. This might push the gold price towards the next important level around $2,371-2,372. If it continues to rise, it could even reach $2,400 and possibly go higher to the all-time peak it reached earlier this month, around $2,431-2,432.
Traders who think gold prices will fall might wait for more selling momentum to confirm their prediction. They’ll watch to see if the price drops below $2,300 and stays there. If it does, they might start making new bets on gold going down.
If the price keeps falling, it could reach a support level around $2,260-2,255 before potentially dropping even lower to around $2,225. After that, the next significant support levels are around $2,200-2,190, where the 50-day Simple Moving Average (SMA) lies.
