The price of gold (XAU) experienced a notable decline of 3.33% over the past week. Nonetheless, XAUUSD saw a slight ascent from 2,330 to 2,340 on Friday.
Potential Implications for Traders
Last week’s precipitous drop in gold prices led to an anticipated upward correction on Friday. Market observers expect gold to test the 2,330 support level. Intriguingly, the U.S. Durable Goods Orders data released on Friday had a minimal impact on XAUUSD. Despite this, the U.S. Dollar Index (DXY) diminished by 0.41%, settling at 103.97. This downturn was influenced by downward revisions in U.S. durable goods and tempered inflation expectations for one and five years, as indicated by the University of Michigan report.
The data released on Friday did little to invigorate investor confidence regarding the Federal Reserve’s (Fed) potential easing of monetary policy. Hawkish remarks from Fed officials may incite speculation about a postponement of U.S. rate cuts this year. The CME FedWatch Tool reveals that investors now perceive a 50% probability of a Fed rate cut in September, down from 64% a week earlier. Investors are also awaiting the U.S. Gross Domestic Product (GDP) report for Q1, annualized, which is set to be unveiled this Thursday. Stronger-than-anticipated figures could strengthen the dollar in the short term and exert downward pressure on XAUUSD.
Following its recent downturn, gold has experienced a modest upward correction. The market is currently subdued due to the U.S. and U.K. bank holidays. Consequently, XAUUSD might decline towards 2,353 throughout the day. This week’s focal point is the upcoming release of the core Personal Consumption Expenditures (PCE) Price Index on Friday, the Fed’s preferred inflation metric. This data will be pivotal in evaluating the pace of inflation and forecasting the trajectory of U.S. interest rates.