Gold prices faced pressure on Friday as the U.S. dollar strengthened modestly, with traders awaiting key economic data that could steer market sentiment. The focus is on the upcoming U.S. Personal Consumption Expenditures (PCE) Price Index, a critical inflation gauge for the Federal Reserve, which is expected to shape expectations regarding future interest rate decisions.
Gold (XAU/USD) remained below the $3,300 level in the European session, maintaining a bearish tone but with no immediate follow-through selling. The U.S. dollar saw some dip-buying ahead of the crucial PCE report, as the market adjusted positions. The report is viewed as a key driver for the Fed’s monetary policy, with implications for commodities like gold. However, concerns over the U.S. fiscal outlook and expectations for further rate cuts by the Fed in 2025 could limit the dollar’s upside, offering some support to gold, a non-yielding asset.
On Thursday, a U.S. federal appeals court reinstated trade tariffs imposed by President Donald Trump, increasing uncertainty in the markets. This decision dampened investor appetite for riskier assets, reflected in the weak performance of stock markets. At the same time, ongoing geopolitical tensions—particularly the Russia-Ukraine conflict and instability in the Middle East—supported demand for safe-haven assets like gold, helping to cap its downside. With the market remaining cautious, investors appear to be waiting for signs of stronger sell-offs before making more decisive moves.
Market Update and Outlook:
The U.S. dollar, which had seen a sharp pullback overnight, failed to sustain its downward movement. Traders appeared reluctant to increase short positions ahead of the Friday release of the PCE data.
On Thursday, a U.S. federal appeals court lifted a previous trade court ruling that had blocked President Trump’s tariffs. The Wall Street Journal later reported that the Trump administration is considering legislation allowing tariffs of up to 15% to be imposed within the next 150 days.
Geopolitical risks also remained high in Europe. Kremlin spokesperson Dmitry Peskov confirmed that Russia had received Ukraine’s response to a proposal for peace talks in Istanbul next week. Meanwhile, White House spokesperson Caroline Levitt stated that Israel had agreed to a U.S.-proposed ceasefire, although Hamas rejected the terms, signaling continued geopolitical uncertainty.
Traders are factoring in the likelihood that the Federal Reserve will step in to support the economy, with expectations of at least two rate cuts of 25 basis points by year-end. However, the minutes from the Fed’s May meeting showed a consensus to maintain a wait-and-see stance due to ongoing uncertainties about economic conditions and trade policies.
Federal Reserve officials, including Chicago Fed President Austan Goolsbee and San Francisco Fed President Mary Daly, have indicated that rate cuts may be considered later in the year if inflation trends downward and the labor market remains robust. In contrast, Dallas Fed President Lori Logan noted that risks to employment and inflation targets are roughly balanced.
Fed Chairman Jerome Powell met with President Trump on Thursday, reaffirming that the Fed’s decisions will be based on the economic data due for release in the coming weeks.
As a result, Friday’s PCE data will be pivotal in shaping market expectations for future rate cuts by the Fed, potentially driving the U.S. dollar and providing new momentum for gold.
Technical Outlook:
Gold remains vulnerable below the $3,325-$3,326 resistance level, with prices hovering near the $3,300 support level. A break below $3,300 could see further declines, with $3,280 emerging as the next support target. If this level is breached, gold may face additional downside toward $3,246-$3,245, the next significant low.
Alternatively, if gold manages to reclaim the $3,325-$3,326 region, this could trigger a short-covering rally, with prices potentially rising towards $3,400. A further move above this level could extend gold’s rise to the $3,432-$3,434 resistance zone.
Related Topics:
Chifeng Gold Seeks Global Acquisitions Amid Rising Gold Prices
Gold Hits Two-Week High Amid US Economic Concerns
Gold Rebounds Slightly as U.S. Data and Trade Talks Drive Focus
