Gold Weekly Forecast: Focus shifts to US growth and inflation data as Fed blackout period gets underway

• Gold retreated sharply after touching a new record-high this week.
• PCE inflation and GDP data from the US will be watched closely by market participants next week.
• The near-term technical outlook highlights a loss of bullish momentum.

After ending the previous week in positive territory, Gold (XAU/USD) gathered further bullish momentum and reached a new record-high of $2,483.75 on Tuesday. Profit-taking and the US Dollar recovery on souring market mood, however, caused the yellow metal to correct sharply in the second half of the week. With the Federal Reserve’s (Fed) blackout period getting underway ahead of the July 30-31 policy meeting, market participants will pay close attention to Gross Domestic Product (GDP) and Personal Consumption Expenditures (PCE) Price Index data from the US next week. 

Gold pulls back after hitting a new all-time-high

Gold edged lower at the beginning of the week as investors reacted to disappointing data from China, which showed that GDP expanded at an annual rate of 4.7% in the second quarter, following the 5.3% growth recorded in the first quarter and falling short of the market expectation of 5.1%. According to other data from China, Retail Sales grew 2% on a yearly basis in June, missing analysts’ estimate of 3.3%. Later in the American session, Fed Chairman Jerome Powell said three better readings on inflation represented further progress in the second quarter and added to their confidence. Powell reiterated that they will make policy decisions on a meeting-by-meeting basis, while speaking at the Economic Club of Washington. The US Dollar (USD) struggled to find demand and allowed XAU/USD to end the day marginally higher on Monday, despite the bearish opening to the week.

The sharp decline seen in the US Treasury bond yields provided a boost to Gold on Tuesday. As the benchmark 10-year US yield fell to its weakest level since March near 4.15%, XAU/USD pushed higher and touched a new all-time peak of $2,483.75 during the Asian trading hours on Wednesday. In the absence of high-tier data releases, the drop in US yields seemed to be a product of markets fully pricing in a Fed rate cut in September.

Profit-taking following the record-setting upsurge caused XAU/USD to correct lower in the second half of the day on Wednesday. On Thursday, the USD captured capital outflows out of the Euro after the European Central Bank (ECB) refrained from dismissing a rate cut in September and caused the pair to extend its correction.

The souring risk mood provided an additional boost to the USD early Friday, causing XAU/USD to stretch lower. With a daily loss of nearly 2% by the American session, Gold fell to the $2,400 area and turned negative for the week. 

Gold investors shift focus to key US data

Next week, S&P Global Purchasing Managers Index (PMI) data for July will be featured in the US economic calendar on Wednesday. The Composite PMI in June arrived at 54.8, showing that the economic activity in private sector expanded at a healthy pace. A reading below 50, which would point to a contraction in July, could feed into expectations for multiple Fed rate reductions later this year and cause the USD to come under renewed bearish pressure. If this data holds comfortably above 50, the market reaction is likely to remain muted.  

The US Bureau of Economic Analysis (BEA) will release the first estimate of the second quarter GDP growth. Markets expect the US economy to expand at an annual rate of 2% in Q2, following the 1.4% growth recorded in Q1. A print above 2% could lift the USD with the immediate reaction and cause Gold to stretch lower. Although such a figure is unlikely to alter expectations for a Fed rate cut in September, it could trim the probability of multiple rate reductions and help the USD gather strength. According to the CME FedWatch Tool, markets currently see a stronger-than-50% chance of the Fed lowering the policy rate by 75 basis points (bps) in 2024. On the other hand, a disappointing growth figure could make it difficult for the USD to find demand.

On Friday, the BEA will publish the Personal Consumption Expenditures (PCE) Price Index data for June. Because Thursday’s GDP report will include the quarterly PCE Price Index and core PCE Price Index figures, the monthly data are unlikely to offer any surprises. In Q1, the core PCE Price Index, the Fed’s preferred gauge of inflation, rose by 3.7%, following the 2% increase seen in the last quarter of 2023. A significant decline in this data, if combined with a weak GDP print, could open the door for another leg higher in Gold. 

Gold technical outlook

The Relative Strength Index (RSI) indicator on the daily chart dropped below 60 on Friday, highlighting a loss of bullish momentum. 

Gold faces key support area at $2,405-$2,400, where the Fibonacci 38.2% retracement of the July uptrend meets the psychological level. In case XAU/USD falls below this level and starts using it as resistance, technical sellers could take action and pave the way for another leg lower toward $2,385 (Fibonacci 50% retracement) and $2,375 (20-day Simple Moving Average). 

On the upside, $2,430 (Fibonacci 23.6% retracement) aligns as interim resistance before $2,460 (static level) and $2,483 (record high).