- A strong pickup in the USD demand prompted aggressive selling around gold on Friday.
- The USD drew some support from elevated US bond yields and hawkish Fed expectations.
- A softer risk tone could lend some support to the safe-haven metal and limit further losses.
- Gold Price Forecast: XAU/USD to maintain range play around $1800 ahead US PCE inflation
Gold witnessed aggressive selling during the early North American session and dived to one-and-half-week lows, around the $1,776 region in the last hour. The US dollar was back in demand on the last trading day of the week and has now reversed a major part of the previous day's dismal US GDP-led slide to one-month lows. This, in turn, was seen as a key factor that weighed heavily on dollar-denominated commodities, including gold.
The USD held on to its strong intraday gains following the release of the softer than expected Core PCE Price Index. The Fed's preferred inflation gauge held steady near 30-year highs in September and came in at 3.6% YoY as against consensus estimates for a modest uptick to 3.7%. The data indicated that consumer cost pressures are getting entrenched and validated expectations the Fed would be forced to adopt a more aggressive policy response to contain stubbornly high inflation.
This, in turn, allowed the yield on the benchmark 10-year US government bond to hold steady above the 1.60% threshold, which further contributed to drive flows away from the non-yielding gold. Apart from this, the latest leg of a sudden fall over the past hour or so could further be attributed to some technical selling below 200-hour SMA. However, a softer risk tone – as depicted by a cautious mood around the equity markets – could extend some support to the safe-haven XAU/USD.
The continuous rise in inflationary pressures comes amid signs of a global economic slowdown and fueled worries about the risk of stagflation. This, in turn, tempered investors appetite for perceived riskier assets, which might hold bearish traders from placing aggressive bets around gold. Nevertheless, the precious metal remains on track to end the week as the focus now shifts to next week's FOMC meeting, where the US central bank is expected to begin tapering its bond purchases.
Technical outlook
From a technical perspective, repeated failures near the $1,810-12 resistance zone and the subsequent fall suggests that the recent positive move has run out of steam. Hence, some follow-through weakness towards testing the next relevant support, near the $1,762 region, remains a distinct possibility. The corrective pullback from multi-week tops could further get extended towards October monthly swing lows, around the $1,745 area.
On the flip side, any meaningful recovery now seems to confront stiff resistance near the $1,790-92 region (100/200-day SMAs confluence) and remain capped near the $1,800 mark. A sustained strength beyond could allow bulls to make a fresh attempt to clear the $1,810-12 barrier and push gold prices towards the $1,832-34 heavy supply zone.
Levels to watch
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD stays in positive territory above 1.0850 after US data
EUR/USD clings to modest daily gains above 1.0850 in the second half of the day on Friday. The improving risk mood makes it difficult for the US Dollar to hold its ground after PCE inflation data, helping the pair edge higher ahead of the weekend.
GBP/USD stabilizes above 1.2850 as risk mood improves
GBP/USD maintains recovery momentum and fluctuates above 1.2850 in the American session on Friday. The positive shift seen in risk mood doesn't allow the US Dollar to preserve its strength and supports the pair.
Gold rebounds above $2,380 as US yields stretch lower
Following a quiet European session, Gold gathers bullish momentum and trades decisively higher on the day above $2,380. The benchmark 10-year US Treasury bond yield loses more than 1% on the day after US PCE inflation data, fuelling XAU/USD's upside.
Avalanche price sets for a rally following retest of key support level
Avalanche (AVAX) price bounced off the $26.34 support level to trade at $27.95 as of Friday. Growing on-chain development activity indicates a potential bullish move in the coming days.
The election, Trump's Dollar policy, and the future of the Yen
After an assassination attempt on former President Donald Trump and drop out of President Biden, Kamala Harris has been endorsed as the Democratic candidate to compete against Trump in the upcoming November US presidential election.