Gold Price Forecast: XAU/USD defends US GDP inflicted loss, Fed inflation clues eyed

• Gold price remains pressured after a volatile day that ended with minor XAU/USD losses.
• XAU/USD drops as United States GDP details signal upbeat inflation component favoring US Dollar bulls.
• First Republic Bank inflicted market fears also exert downside pressure on the Gold price but tech earning prod XAU/USD downside.
• Federal Reserve’s favorite inflation gauge eyed after upbeat Core PCE Price figures.

Gold price (XAU/USD) fades late Thursday’s corrective bounce off the weekly low as it drops to $1,986 during the early hours of Friday’s Asian session. In doing so, the precious metal keeps the previous day’s downside bias intact, mainly propelled by the United States' growth, inflation and employment figures. However, the upbeat performance of equities, led by the tech giant’s earnings, joins the anxiety ahead of the Fed’s preferred inflation gauge to prod the XAU/USD traders.

Gold Price lures bears on United States GDP’s upbeat details

Gold price justifies upbeat inflation signals from the United States data ahead of the next week’s Federal Open Market Committee (FOMC) monetary policy meeting.

On Thursday, the first readings of the US Gross Domestic Product (GDP) for the first quarter (Q1) of 2023, also known as Advance readings, marked mixed outcomes. That said, the headline US GDP Annualized eased to 1.1% from 2.0% expected and 2.6% prior but the GDP Price Index inched higher to 4.0% on an annualized basis from 3.9% prior and 3.8% market consensus. Further, the Personal Consumption Expenditure (PCE) Prices for Q1 rallied to 4.2% from 3.7% in previous readouts whereas the Core PCE figures also crossed 4.8% market forecasts and 4.4% prior with 4.9% mark for the said period. It should be noted that a slump in the weekly Initial Jobless Claims also allowed the US Dollar to remain firmer.

Following the data, the US Dollar Index (DXY) managed to print a notable upside, of around 30 pips, before paring some of its gains but posting a daily positive close on Thursday. The same initially pushed the Gold price to prod the weekly low surrounding $1,984 before trimming the losses, retreating from $1,990 of late.

It should be noted, however, that the risk-on mood, mainly led by the strong United States technology giants’ earnings and mixed US data, allowed Wall Street to have the biggest daily gain in a week. The same also propelled US Treasury bond yields and put a floor under the Gold price. Though, US banking fallout fears regain momentum amid reports that the First Republic Bank (FRB) plans to sell half its loan book to fill a $100B deposit flight gap, which in turn weighs on the XAU/USD, together with the hawkish Federal Reserve bets.

Additionally weighing on the Gold price could be the likely deadlock over the US debt ceiling talks as most policymakers have contrasting views. Recently, House Speak Kevin McCarthy said, “I won't pass a clean debt-limit increase.”

Fed’s favorite inflation gauge, First Republic Bank-induced banking jitters eyed

Moving on, the Gold price is likely to remain pressured amid the recently hawkish Federal Reserve (Fed) concerns and the market’s geopolitical fears, as well as due to banking FRB-led banking woes.

However, the quote’s further downside hinges on the Fed’s preferred inflation data, namely the US Core Personal Consumption Expenditure (PCE)  Price Index for March, expected to ease to 4.5% YoY versus 4.6% prior. Should the inflation clues arrive as softer, the Gold price may pare recent losses while justifying the risk-on mood. However, strong prints of the data can allow the Fed to delay policy pivot, which in turn can trigger the much-needed Gold price pullback.

Also read: US Core PCE Preview: Why this is a lose-lose situation for the US Dollar

Gold price technical analysis

Gold price appears well-set to defy a six-week-old bullish channel formation with sustained trading below the 21-day Simple Moving Average (SMA).

That said, bearish signals from the Moving Average Convergence and Divergence (MACD) indicator and a descending but not below 50 Relative Strength Index (RSI) line, placed at 14, add strength to the downside bias.

However, a sustained break of the $1,980 support comprising the stated channel’s bottom line becomes necessary for the Gold price to lure the bears. Even so, February’s high near $1,960 and the 50-day SMA surrounding $1,930 could check the bearish moves afterward.

It’s worth mentioning that an upward-sloping support line from early November 2022, close to $1,890 by the press time, appears the last defense of the XAU/USD buyers, a break of which could reverse the bullish trend established in the last six months.

On the contrary, Gold price recovery needs to provide a daily closing beyond the 21-day hurdle of $1,997, as well as mark successful trading beyond the $2,000 mark to convince bulls.

Though, multiple swings around $2,010 can challenge the XAU/USD buyers before preparing them for a bumpy ride towards the north which includes $2,030 and $2,050 initial levels before the likely reversal point around $2,060, comprising the previously mentioned channel’s top line.

Overall, Gold price losses upside momentum as the markets prepare for the Federal Reserve’s preferred inflation gauge, as well as next week’s Federal Open Market Committee (FOMC) monetary policy meeting.

Gold price: Daily chart

Trend: Further downside expected