Gold (XAU) Daily Forecast: US PCE Data Looms, XAU Steady Near Key $2,665 Support Level

Market Overview

Gold (XAU/USD) slipped below the $2,669 mark during Friday’s Asian session, failing to sustain its bullish momentum from the previous day. The precious metal remains close to recent highs but has struggled to break out amid renewed strength in the US Dollar and risk-on sentiment in global markets.

Traders are holding off on making big moves ahead of the US Personal Consumption Expenditure (PCE) Price Index, a crucial inflation gauge that could signal the Federal Reserve’s next policy moves.

While geopolitical tensions in the Middle East continue to support demand for safe-haven assets like gold, the upside remains limited due to growing risk appetite and a stronger dollar. However, expectations of a significant Fed rate cut in November provide some underlying support for gold.

Impact of US Economic Developments and Fed Expectations on Gold Prices

Due to strong economic data and a cautious tone from top Federal Reserve officials, the US dollar (USD) edged higher on Thursday, limiting gold’s potential gains. Fed Governor Michelle Bowman and Atlanta Fed President Raphael Bostic argued against rushing into aggressive rate cuts, citing concerns over inflation persistence.

“The risks to inflation remain elevated, and we need to be cautious about prematurely loosening policy,” Bowman stated.

However, other Federal Reserve officials, including Governor Lisa Cook, have signalled support for a 50 basis point cut, noting that inflation risks have lessened and employment concerns are mounting.

According to the CME Group’s FedWatch Tool, the likelihood of a 50 basis point rate cut at the Fed’s November meeting has risen to over 50%.

US Data Provides Mixed Signals

The latest US economic data revealed 3% growth in Q2 GDP, while durable goods orders stagnated for August, providing mixed signals about the economy’s strength.

Initial jobless claims also fell to 218,000, their lowest level since May, adding to the case for the Federal Reserve to remain cautious in its approach.

Friday’s release of the PCE Price Index could be pivotal in shaping gold’s performance, especially as the market anticipates further clarity on the Fed’s future monetary policy. If the data strengthens the case for a rate cut, gold could see renewed demand.

Outlook for Gold Prices

Despite the pressure from a stronger US dollar, the outlook for gold remains somewhat optimistic due to rising expectations of dovish Federal Reserve actions.

A 50 basis point rate cut could provide a substantial boost to the non-yielding asset. However, any uptick in risk sentiment or stronger-than-expected US inflation data could keep gold prices in check, preventing a significant rally.

Short-Term Forecast

Gold prices are expected to remain volatile at nearly $2,666 as traders await US PCE data. A break below this pivot could spark selling, while a rate cut may fuel upside potential.

Gold Prices Forecast: Technical Analysis

Gold (XAU/USD) is trading at $2,669.85, down 0.09% in the latest session, holding near a key pivot point at $2,666.36. The precious metal is experiencing a cautious range, with immediate resistance at $2,674.04 and additional levels at $2,678.91 and $2,685.48.

Support on the downside is holding steady at $2,660.70, with deeper levels coming in at $2,654.91 and $2,649.86.

The 50-day Exponential Moving Average (EMA) at $2,662.48 offers crucial near-term support, while the 200-day EMA at $2,621.03 underpins a longer-term bullish trend. A break below $2,666 could see further selling pressure, while a move above this pivot could re-ignite bullish momentum.