Gold Price Forecast: XAU/USD sellers refuse to give up, as US PCE inflation looms

• Gold price returns to the red early Friday, awaiting US PCE inflation data. 
• The US Dollar follows the USD/JPY and Treasury bond yields higher even as the mood improves.  
• The fate of Gold price hinges on the top-tier US data but downside risks remain intact.

Gold price has snapped its rebound from two-week lows early Friday, losing ground after running into offers near the $2,330 resistance again. The next direction for Gold price now remains in the hands of the US Personal Consumption Expenditure (PCE) inflation data.

All eyes remain on US PCE inflation data and Japan’s intervention risks

Gold price is back in negative territory in Asian trading on Friday, as the US Dollar extends Thursday’s late rebound and recovers lost ground on the back of the resumption of the USD/JPY uptrend and rising US Treasury bond yields.

Higher US Dollar and US Treasury bond yields trigger a fresh bout of selling in the non-yielding Gold price. Additionally, traders turn cautious and refrain from placing fresh bets on Gold price heading into the US inflation showdown.

The US annual PCE Price Index is seen rising 2.6% in May, compared to a 2.7% increase in April while the Federal Reserve (Fed) preferred inflation measure, the core PCE figure, is expected to accelerate by 2.6% YoY, slowing from a 2.8% growth in April.

If the inflation data points to slowing price pressures, Gold price is likely to regain its recovery momentum, as the US Dollar would come under strong selling pressure on increased bets for a September rate cut. On the contrary, the US Dollar could stretch its recent advance and weigh on Gold price should the data surprise to the upside.

Markets are now pricing in about a 64% chance of a Fed rate cut in September, a tad higher than the 62% seen Thursday, according to CME FedWatch Tool.

Meanwhile, the first US presidential election debate in the showdown to the November 5 polls had little to no impact on the value of the US Dollar and that of Gold price.

On Thursday, mixed US growth, Durable Goods Orders and housing data exerted downward pressure on the US Dollar. The Greenback already bore the brunt of the correction in the USD/JPY. This helped Gold price stage a decent comeback from two-week troughs under $2,300.

Further, Fed Governor Michele Bowman’s change of words exacerbated the buck’s pain. Bowman said, “I am still willing to raise rates again if inflation doesn’t ease.” Atlanta Fed President Raphael Bostic also delivered dovish remarks, suggesting that an interest rate cut in the fourth quarter was likely, with inflation moving in the right direction.  

Gold price technical analysis: Daily chart

 

Gold price downside remains intact, despite the previous rebound, as the 14-day Relative Strength Index (RSI) remains below the 50 level.

Therefore, any rebound in Gold price continues to remain a good selling opportunity.   

Adding credence to the bearish potential, the previous week’s 21-day Simple Moving Average (SMA) and the 50-day SMA bearish crossover continues to act as a headwind.

If sellers extend control, the $2,300 threshold will be put to test once again, below which the June low at $2,287 could come to the buyers’ rescue.

Further down, the May 3 low at $2,277 will come into play.  

Alternatively, Gold price needs to take out the 21-day SMA at $2,328 on a daily closing basis to resume the recovery from the monthly low of $2,287.  

Further up, the 50-day SMA at $2,338 will be eyed, followed by the two-week high of $2,366.