Gold rises amid soft US Dollar as traders eye next week Fed meeting

• Gold price bounces from daily lows of $2,356, now at $2,385.
• Fed's preferred inflation gauge shows mixed results, edging closer to the 2% target.
• US Treasury yields slump as bonds rally, signaling potential for multiple Fed rate cuts this year.

Gold price makes a U-turn after diving to two-week lows of $2,353 edges higher some 0.80% as market participants seem secure the Federal Reserve will lower interest rates at the September meeting, following a soft inflation report. The XAU/USD trades at $2,385 after bouncing off daily lows of $2,356.

The US Bureau of Economic Analysis (BEA) revealed that the Fed’s favorite inflation gauge, the Personal Consumption Expenditure Price Index (PCE), ticked a tenth higher monthly than May’s data. It dipped as foreseen in the twelve months to June, though it’s at the brisk of hitting the Fed’s 2% goal.

June’s Core PCE edged up a tenth every month, while year-over-year (YoY) was unchanged, above projections.

Following the data, US bonds rallied, and consequently, US Treasury yields slumped, with the 10-year note sliding four and a half basis points to 4.202%.

Sources cited by Reuters noted, “Today's mixed-to-weaker U.S. data suggests inflationary pressures and economic activity are waning, paving the way for the Fed to cut rates twice this year.”

Next week, the Federal Reserve will make its latest monetary policy decision. The central bank is expected to keep rates unchanged, but the meeting could pave the way for the first cut at the September meeting.

Daily digest market movers: Gold price bounces off weekly lows

• The US PCE in June rose by 0.1% month-over-month (MoM) and 2.5% year-over-year (YoY); both figures were as expected, with the annual rate falling from 2.6%.
• Core PCE expanded by 0.2% MoM, exceeding estimates and May’s figure. On an annual basis, Core PCE rose by 2.6%, higher than forecasts and unchanged from the prior month’s reading.
• The University of Michigan Consumer Sentiment survey, in its final reading, jumped to 66.4, missing projections of 66.
• Inflation expectations for one year decreased from 3% to 2.9%, while for a five-year period, they remained unchanged at 3%.
• Data from the Chicago Board of Trade (CBOT) shows that traders are pricing in 55 basis points (bps) of easing towards the end of the year, as indicated by the December 2024 fed funds rate futures contract.

Technical analysis: Gold price climbs but remains below $2,400

Gold prices remain upward biased, snapping two days of losses and forming a ‘bullish harami’ two-candle chart. Momentum hints that buyers are still in charge, as depicted by the Relative Strength Index (RSI), which pierced above the 50-neutral line, opening the door for further upside.

XAU/USD buyers must reclaim $2,400 before pushing prices above the psychological $2,450 area. A breach of the latter will expose the all-time high (ATH) at around $2,483, followed by the $2,500 mark.

On the flip side, if XAU/USD continues to edge lower and drop below the 50-day moving average (DMA) at $2,359, further losses are on the cards. The next support would be the July 25 daily low of $2,353. Once those levels are removed, the 100-DMA would be up next at $2,324, ahead of diving to the $2,300 mark.