The gold price (XAU/USD) retreated to the $2,330s, reversing the gains made after the release of US Personal Consumption Expenditure (PCE) data for April. The PCE, the Federal Reserve’s preferred inflation gauge, showed core price pressures cooling to 0.2% month-over-month, down from 0.3%, according to the Bureau of Economic Analysis. Analysts had anticipated Core PCE to remain steady at 0.3%. This unexpected drop in Core PCE suggests that US inflation is cooling faster than predicted, increasing the likelihood of the Federal Reserve cutting interest rates sooner.
Effect of Weaker US Growth Data on Gold Prices
Gold saw a recovery following the release of weaker US growth data, as the second estimate of US first-quarter GDP growth was revised down to an annualized 1.3% from the initial 1.6%. The slowdown in growth resulted from reduced consumer spending, which is anticipated to keep inflation in check and prompt the Federal Reserve to lower interest rates. Consequently, the yield on the US 10-year Treasury Note dropped, signaling a potential rate cut in the future.
Asian Demand for Gold as a Currency Hedge
Apart from US interest rate expectations, Asian buyers utilize gold as a hedge against their depreciating currencies compared to the strengthening US Dollar. This demand for gold as a currency depreciation hedge suggests that the precious metal prices could remain resilient even with a stronger USD, indicating a diverse range of factors contributing to gold’s value.
Upcoming Economic Events Impacting Gold Prices
The upcoming week presents significant economic events that could influence gold prices, including key data releases such as the Final Manufacturing PMI, ISM Manufacturing PMI, JOLTS Job Openings, ADP Non-Farm Employment Change, Final Services PMI, ISM Services PMI, Unemployment Claims, and Average Hourly Earnings, among others.
Gold Price Forecast
Gold spot prices closed trading around $2,327.60, slightly below the pivot point at $2,352.75. The immediate resistance level stands at $2,350.36, with support at $2,324.79. Despite the bearish sentiment indicated by the price being below the 50-day Exponential Moving Average of $2,352.75, closely monitoring support and resistance points is essential as gold navigates critical levels in the market.
