- The price of gold is consolidating after last week’s recovery.
- If US PCE misses forecasts, investors will expect a more dovish Fed.
- Middle East tensions supported gold on Thursday.
The outlook for gold is bullish as investors await more U.S. inflation data for clues on the size and pace of Fed rate cuts. Despite brief pullbacks, gold remains bullish on rate cut optimism and safe-haven demand.
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Gold traded lower on Wednesday as the dollar strengthened amid speculation ahead of Friday’s inflation. Prices have fluctuated this week, consolidating after last week’s recovery. On Friday, Powell said it was time for the Fed to turn around and cut interest rates. As a result, investors increased bets on a September rate cut, pushing Treasury yields lower. Meanwhile, gold, a non-profitable asset, rallied.
However, this week saw a mix of rate cut optimism, data caution and geopolitical tensions. The caution prompted most investors to take profits ahead of Friday’s PCE price index report. At the same time, prices jumped higher on the likelihood of new evidence that inflation is falling.
If PCE figures miss forecasts, investors will expect a more dovish Fed. Accordingly, the price of XAU/USD will rise. On the other hand, if inflation meets forecasts or comes in slightly higher, gold could briefly ease. Market participants fully expect a rate cut and it will take a lot to change this outlook. Therefore, there is probably more upside potential for gold.
Meanwhile, Middle East tensions supported gold on Thursday as the war in Gaza intensified. Israel has engaged in missile wars with Hezbollah that have raised fears of escalation. Consequently, investors bought more safe assets like gold.
Gold key events today
- Preliminary US GDP q/q
- US unemployment claims
Gold Technical Outlook: Bulls retest resistance at 2520.09
On the technical side, the KSAU/USD price is retesting the solid resistance level of 2520.09. The bias is bullish as the price is trading above the 30-SMA with the RSI above 50. At the same time, the price has made a series of highs and lows, indicating a developed bullish trend.
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The trend stalled and started consolidating with support at 2480.38 and resistance at 2520.09. However, the bulls remained stronger as the price respected its bullish trend line. Consequently, it could soon break through the range resistance to make a new high.
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