Gold Prices Forecast: XAU/USD Set for Weekly Decline Ahead of PCE Index Data

Key Points

• Robust U.S. economy, strong dollar weigh on gold prices.
• Gold’s decline continues for a second consecutive week.
• Markets anticipate Fed’s stance, influencing gold’s future.

Impact of U.S. Economy and Dollar Strength

Gold is on track for its second consecutive weekly loss, influenced by the strong performance of the U.S. economy, which has bolstered the dollar to near multi-week highs.

The resilience of the U.S. economy, particularly with higher-than-anticipated growth in the fourth quarter, is capping gold’s potential gains. This economic vigor is also altering expectations regarding the timing of the Federal Reserve’s first rate cut, now seen as more distant.

At 08:21 GMT, XAU/USD is trading $2022.12, up $1.18 or +0.06%.

Interplay Between Economic Growth and Inflation

The U.S. economy’s robust growth in Q4, paired with subdued inflationary pressures, presents a complex scenario for gold. While GDP grew at an impressive 3.3% annualized rate, surpassing Wall Street predictions, inflation remained controlled.

The core PCE price index, a key inflation measure, saw a 2% rise, lower than the previous year’s figures. This moderation in inflation has impacted treasury yields, which fell on these reports, offering a brief respite to gold prices.

Labor Market Signals and Fed Outlook

Recent labor market data, showing an uptick in jobless claims, hints at potential slackening in the jobs market. This development, combined with moderated inflation, suggests the Federal Reserve might maintain its current policy stance in the near term.

Market attention is now focused on the upcoming Fed meeting and comments from Chair Jerome Powell, with speculation mounting over a rate cut potentially occurring in May.

Short-Term Gold Market Forecast

In the short term, gold prices may continue to face downward pressure due to the strong dollar and the anticipation of steady or potentially rising interest rates.

However, any signs of weakening in the U.S. economy or shifts in the Fed’s policy stance could alter this trajectory, making the upcoming PCE data crucial for future price movements. Investors should also keep an eye on treasury yields, as their fluctuations can significantly influence gold’s appeal as a non-yielding asset.

Technical Analysis

Gold (XAU/USD) is edging higher on Friday as bullish traders make an attempt to overcome the 50-day moving average at $2027.09. This moving average has been pivotal in determining the price action this week.

A sustained move over the 50-day MA or intermediate trend indicator could create the upside momentum needed to challenge the nearest resistance at $2067.00.

A failure to overcome it, however, will be a sign of weakness. This could lead to a test of the support at $2009.00. This price is also the trigger point for an acceleration to the downside with the next major target the 200-day MA at $1964.08.