- The selling bias around the dollar helps gold gain some positive traction on Friday.
- Speculation that the Federal Reserve would pause the interest rate hike cycle weighed on the dollar.
- Risk appetite could cap the yellow metal’s gains ahead of the release of the US PCE price index.
The price of gold (XAU/USD) it has built on the previous day’s bounce from the important support of the 200-day SMA and has moved higher on Friday. XAU/USD maintains its modest intraday gains during the early part of the European session, hovering near the upper end of the daily range, just above the $1,850 level.
The US dollar continued its recent downtrend and fell to a fresh one-month low on Friday, which in turn benefited the dollar-denominated price of gold. The minutes of the meeting of the Federal Open Market Committee (FOMC) published on Wednesday suggest that the Fed could pause the rate hike cycle after two hikes of 50 basis points each in June and July, amid worsening economic prospects. Speculation was fueled by the release on Thursday of the US’s preliminary GDP report, which showed that the world’s largest economy shrank at an annualized rate of 1.5% in the first quarter. This was seen as a key factor putting downward pressure on the dollar.
Meanwhile, doubts about the Federal Reserve’s ability to control inflation without plunging the economy into recession continued. dragging down the yield on US Treasury bonds. In fact, the yield on the benchmark 10-year US government bond fell to its lowest level in six weeks, further weighing on the USD and providing additional support for gold, which is failing to yield. Having said that, a positive change in global risk sentiment, as evidenced by the positive tone surrounding equity markets, could act as a headwind for the safe-haven precious metal. This could slow down the bulls before opening new aggressive positions.
Market participants are now awaiting the release of the US core PCE price index, the Fed’s preferred gauge of inflation, to gain some momentum later in the American session. This, along with US bond yields, will influence dollar price dynamics and provide some lift to gold. Aside from this, investors will take cues from the broader market risk sentiment to take advantage of some short-term opportunities on the last day of the week.
gold technical levels
Source: Fx Street
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