Gold Price Forecast: XAU/USD approaches $1,870 hurdle as USD slides ahead of US PCE Inflation

• Gold prices snap two-day downtrend as 200-DMA limits short-term fall.
• Downbeat US data, mixed sentiment underpin US dollar weakness ahead of Fed’s preferred inflation gauge.
• Monthly resistance lures buyers but geopolitical, covid headlines test upside momentum.
• Gold dropped as expected & rebound in progress

Gold Price (XAU/USD) marks another bounce off the 200-DMA as bulls flirt with the $1,855 during Friday’s Asian session. In doing so, the bullion prices print the first daily gains in three while bracing for the key upside hurdle.

The yellow metal cheers the broad US dollar weakness amid the market’s indecision. However, the metal’s gains seem to be challenged by the cautious mood ahead of the US Federal Reserve (Fed) preferred inflation gauge, namely the US Core Personal Consumption Expenditure (PCE) Price Index.

The US Dollar Index (DXY) refreshes the monthly low at the 101.43 level as market participants welcomed the lack of uncertainty over the Fed’s next move with zeal. Also weighing on the greenback could be the recently downbeat US data. It should be noted that the latest FOMC Minutes and Fedspeak have both confirmed two 50 bps rate hikes, which the market seems to have already priced and hence allows traders to trigger the month-end profit booking moves of the USD.

That said, the US preliminary Q1 2022 Annualized GDP eased to -1.5%, below -1.4% prior and -1.3% forecasts, whereas the Pending Home Sales slumped in April, to -3.9% versus -2.0% forecast.

While the DXY weakness underpins gold’s upside momentum, downbeat data from China and fears of global recession, as well as cautious mood ahead of the key US data test buyers.

China’s Industrial Profits for the January-April period dropped to 3.5% versus 8.5% prior whereas the figures for April slumped to -8.5% versus 12.2% previous gains.

Among the risk-negative negative catalysts are headlines suggesting the US-Taiwan ties, which China dislikes. On the same line are the fears of a global recession. Additionally, Russia’s refrain from stepping back and Ukraine’s readiness to fight more also keeps weighing on the sentiment.

Amid these plays, the US 10-year Treasury yields remained indecisive around 2.75% while the S&P 500 Futures print mild losses around 4,050, down 0.10% intraday at the latest.

Looking forward, the US Dollar Index weakness and mixed catalysts may keep XAU/USD buyers hopeful ahead of the US Core Personal Consumption Expenditure (PCE) Price Index for April, expected at 4.9% YoY versus 5.2% prior. Should the Fed’s preferred inflation gauge rise more than expected, the US dollar may consolidate recent losses and probe the gold buyers.

Technical analysis

Gold portrays the second bounce off the 200-DMA with its latest run-up, suggesting the buyer’s hesitance in leaving the desk. The upside momentum could also gain support from the bullish MACD signals and steady RSI (14).

Hence, the metal prices are likely to extend the latest rebound towards a one-month-old descending resistance line, around $1,868 by the press time.

It’s worth noting that gold’s run-up beyond $1,868 needs validation from the weekly top near $1,870 before directing buyers towards the month’s high close to $1,910.

Alternatively, pullback moves remain elusive beyond the 200-DMA level of $1,839, a break of which will direct the gold sellers towards the $1,808-07 support zone.

In a case where gold bears keep reins past $1,807, the monthly low of around $1,785 will be in focus.

Gold: Daily chart

Trend: Further upside expected