Gold Price Analysis: XAU/USD holds above 200DMA near $1850 as focus turns to Friday’s US inflation data

• Gold is holding above its 200DMA in the $1850 area and is back to nearly flat on the week.
• Traders are weighing the tailwinds of a softer USD/US yields versus strong US equities as key Friday inflation data looms.

Spot gold (XAU/USD) is for now holding just above its 200-Day Moving Average at $1839 and trading near the $1850 level, though still with a slight downside bias on the day, despite Thursday’s worse than expected US GDP figures and Wednesday’s not as hawkish as feared Fed minutes release. Indeed, in wake of the weak data and modest paring back of hawkish Fed bets, the US dollar is a tad weaker and US yields are nudging lower, a combination that would normally be a tailwind for gold.

But US equities are rallying, with the S&P 500 last trading up around 1.4% on the day and eyeing a test of its 21-Day Moving Average for the first time since mid-April. On the week, the index is trading with gains of more than 3.0% and this appears to be weighing on the safe-haven precious metal. Traders are attributing stock market gains to weak GDP data reducing the need for aggressive Fed tightening and to strong earnings from a few US companies, including retail giant Macy’s.

Either way, the better tone to risk appetite is for now keeping XAU/USD on the back foot. Having been as high as the $1870 level earlier in the week, spot gold’s gains on the week have been eroded back to only about 0.2% from around 1.2%. But the recent pullback towards the 200DMA might prove a good opportunity for the gold bulls to add to long positions if they think that hawkish Fed bets will continue to be pared in the weeks ahead and, as a result, the buck and US yields continue softening. If it contributes to the strengthening narrative that US inflation has peaked, Friday’s US April Core PCE report could lead to a further reduction of Fed tightening bets and gold could well end the week back at highs in the $1870 area.