Gold price advances modestly, all eyes on US PCE data
- Gold price trades with a mild positive bias on Friday.
- The weaker USD and decline of US yields support the yellow metal.
- Investors will take more cues from the US April PCE inflation data, which is due on Friday.
Gold price (XAU/USD) rises modestly on Friday on the back of the softer US dollar (USD) and lower US yields. Traders place higher bets that the Federal Reserve (Fed) will cut the interest rate this year after the recent weaker US GDP data. Furthermore, the geopolitical risks and conflicts in the Middle East might boost the precious metal as it is perceived as a traditional safe-haven asset.
Later on Friday, gold traders will keep an eye on the US April Core Personal Consumption Expenditures Price Index (Core PCE), the Fed’s preferred inflation measure. The Core PCE figure is projected to show an increase of 0.3% MoM and 2.8% YoY in April. In case of the hotter-than-expected inflation data, this might provide some support to the Greenback and cap the upside for gold price.
Daily Digest Market Movers: Gold price edges higher amid the Middle East geopolitical tensions and weaker US GDP report
- Israel is in effective control of Gaza’s entire land border after taking control of a buffer zone along the border with Egypt, Israel’s military has said, a move that may complicate its ties with Egypt, per the Guardian.
- The second estimate of US Gross Domestic Product (GDP) showed the economy expanded at an annualized pace of 1.3% in Q1 from 1.6% in the previous reading, in line with market expectations.
- The US weekly Initial Jobless Claims for the week ending May 25 rose to 219K from the previous week of 216K, above the market consensus of 218K.
- Chicago Fed President Austan Goolsbee said on Thursday that housing inflation remains a key sticking point in price growth and that the US labor market remains quite strong.
- Atlanta Fed President Raphael Bostic stated that central bankers are unlikely to deliver an interest rate cut in July amid signs that inflation progress has slowed.
- New York Fed President John Williams noted that inflation is still too high, but he is confident it will start decelerating later this year, per CNBC.
Technical analysis: Gold price remains positive on the daily chart
The gold price posts modest gains on the day. Technically, the yellow metal maintains the bullish picture unchanged as it is above the key 100-day Exponential Moving Average (EMA) on the daily timeframe. Nonetheless, the 14-day Relative Strength Index (RSI) hovers around the 50-midline, suggesting a lack of direction of gold price and further consolidation looks favourable.
The upper boundary of the Bollinger Band near $2,425 acts as an immediate resistance level for precious metal. Any follow-through buying will see a rally to the all-time high of $2,450 en route to the $2,500 psychological barrier.
On the other hand, the key contention level will emerge at the $2,290–$2,300 region, portraying the lower limit of the Bollinger Band and the round mark. A decisive break below this level will drag the yellow metal lower to the 100-day EMA of $2,230.
US Dollar price today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the New Zealand Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.00% | -0.02% | -0.03% | -0.15% | -0.15% | -0.19% | -0.09% | |
| EUR | 0.02% | -0.02% | -0.02% | -0.11% | -0.11% | -0.14% | -0.06% | |
| GBP | 0.02% | 0.00% | 0.00% | -0.10% | -0.10% | -0.14% | -0.05% | |
| CAD | 0.03% | 0.01% | 0.01% | -0.10% | -0.10% | -0.13% | -0.05% | |
| AUD | 0.13% | 0.10% | 0.11% | 0.09% | -0.02% | -0.05% | 0.03% | |
| JPY | 0.14% | 0.14% | 0.10% | 0.09% | 0.00% | -0.03% | 0.05% | |
| NZD | 0.16% | 0.14% | 0.14% | 0.12% | 0.03% | 0.01% | 0.09% | |
| CHF | 0.07% | 0.05% | 0.05% | 0.04% | -0.07% | -0.07% | -0.11% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.