Gold News: XAU/USD Hovers Above Critical Support Ahead of PCE Data

Gold Prices Edge Higher Ahead of Crucial PCE Report

Gold prices are showing modest gains on Friday, with the market hovering just above the critical 50-day moving average support at $2359.84. Traders are closely watching this level as it may determine the market’s direction into the close.

At 10:59 GMT, XAU/USD is trading $2372.96, up $8.60 or +0.37%.

Market Reaction to Economic Data

Thursday saw a sharp sell-off in gold prices following stronger-than-expected U.S. economic growth data. The precious metal hit its lowest point since July 9, with prices down 4.5% from the record high of $2,483.60 on July 17. This decline is attributed to growing optimism for a Federal Reserve rate cut in September.

Focus on PCE Inflation Data

All eyes are now on the U.S. personal consumption expenditure (PCE) data for June, the Fed’s preferred inflation measure, due at 12:30 GMT. Economists surveyed by Dow Jones expect headline PCE to come in at 2.5% annually and 0.1% month-over-month. This report could significantly impact gold’s price movement.

Treasury Yields and Dollar Index

The 2-year Treasury yield dipped slightly as investors await the PCE data. The dollar index remains steady at 104.35, with the euro showing marginal strength at $1.0853. Traders will closely monitor these indicators following the PCE report release.

Global Gold Demand

High prices and seasonal factors have dampened demand in top consumer China. Net gold imports via Hong Kong dropped 18% in June from May, while Swiss gold exports to China fell to their lowest level since May 2022. In India, physical demand has also been affected by high prices, although the recent reduction in the state gold import tax may provide support.

Market Forecast

The short-term outlook for gold remains bearish, with the metal vulnerable to a steep decline if the 50-day moving average fails as support. However, the PCE report could act as a catalyst for an accelerated movement in either direction. Traders should be prepared for potential volatility as the market reacts to this crucial economic indicator and its implications for future Fed policy decisions.

Technical Analysis

Trader reaction to the 50-day moving average at $2359.84 should set the tone today.

On the upside, holding above the 50-day MA will indicate the presence of buyers, but overcoming the short-term pivot at $2380.54 could trigger an acceleration to the upside with $2418.47 the first target, followed by $2483.74.

On the downside, a failure to hold the 50-day MA could trigger an acceleration to the downside with the next target zone coming in at $2293.69 to $2277.34.