Gold price falls ahead of US PCE, holds above $2,300 mark

• Gold price struggles to capitalize on strong overnight rebound from two-week low.
• Uncertainty over Fed rate cuts helps limit USD correction and caps metal gains.
• Traders also seem reluctant to place aggressive bets ahead of the important US Personal Consumption Expenditure (PCE) Price Index.

Gold (XAU/USD) posted strong gains of over 1% on Thursday and snapped a two-day losing streak to a two-week low touched the previous day. US macroeconomic data released on Thursday suggested that growth momentum in the world’s largest economy is moderating. This adds to signs of easing inflationary pressures and reaffirms market expectations that the Federal Reserve (Fed) will start cutting interest rates. This led to the overnight decline in US Treasury bond yields this year, triggering the US Dollar (USD) correction from its highest level since early May and benefiting the precious metal.

Apart from this, geopolitical tensions in the Middle East and the protracted war between Russia and Ukraine provided an additional boost to the safe haven price of Gold. However, the upside of of the US Personal Consumption Expenditure (PCE), which will be published later during the North American session. The crucial US inflation data will influence expectations about the Fed’s future policy decision and determine the near-term trajectory of the non-yielding yellow metal.

Daily Market Wrap: Gold Price Awaits US PCE for Further Signals on Fed Rate Cut Path

• Softer US macroeconomic data released on Thursday raised bets for an imminent start to the Federal Reserve’s rate cutting cycle this year and triggered a short-covering rally around the price of Gold.
• US real GDP growth for the first quarter was revised up to an annualized pace of 1.4%, although it marked the slowest increase since spring 2022 and confirmed a sharp deceleration from 3.4% in the previous quarter.
• The U.S. Census Bureau reported that durable goods orders rose 0.1% in May compared with an anticipated 0.1% decline and 0.6% growth (revised from +0.7%) recorded in the previous month.
• Separately, the Labor Department said initial claims for unemployment benefits fell to 233,000 in the week ended June 22, but the four-week moving average rose to 236,000, the highest level since last September.
• Additionally, U.S. pending home sales – a leading indicator of home sales based on contract signings – unexpectedly fell 2.1% in May, to the lowest level since 2001.
• This comes on top of tepid US retail sales figures for May and signs that inflation is easing, which, in turn, should allow the Fed to reduce borrowing costs as soon as the meeting. of September monetary policy.
• The US dollar, however, found some support in comments from Fed Governor Michelle Bowman, who said that we are not yet at a point to consider a rate cut as upside risks to inflation remain.
• This, in turn, limits any further gains for the XAU/USD ahead of the release of the US Personal Consumption Expenditure (PCE) Price Index – the Fed’s preferred inflation gauge – later on Friday.

Technical Analysis: Gold Price Fails Before Breakout Point of 50-Day SMA Support Turned Resistance

From a technical perspective, the overnight positive move stopped short of the breakout point of the 50-day simple moving average (SMA) support, now converted into resistance. This barrier is currently situated near the $2,337-$2,338 region, which should now act as a key point. Sustained strength beyond has the potential to lift the price of Gold back towards the $2,360-$2,365 supply zone. Some follow-on buying will negate any short-term negative bias and allow the bulls to reclaim the $2,400 mark. The momentum could extend further towards challenging the all-time peak, around the $2,450 zone touched in May.

On the downside, the $2,300 mark is likely to protect the immediate decline before the horizontal support at $2,285. A convincing break below the latter will be seen as a new trigger for bearish traders and will drag the price of Gold towards the 100-day SMA, currently near the $2,250 area. XAU/USD could eventually fall to the $2,225-$2,220 region en route towards the $2,200 mark.