Gold price forecast: XAU/USD reaches lows of March after US data

• XAU/USD falls to $1,940.00, during the American session.
• US GDP is revised up to 1.3% in the first quarter of the year (Q1), while Jobless Claims come in below expectations.
• Core PCE inflation rises by 5% in Q1.

The XAU/USD drops to its lowest level since March 22 due to strong economic data and a high Personal Consumption Expenditures (PCE) inflation. This leads investors to place higher bets on a 25 basis points interest rate hike by the Federal Reserve (Fed) in the upcoming June meeting. Consequently, US bond yields increase, exerting pressure on Gold prices and favoring the US Dollar.

The Gold price, as of the time of writing, is trading at $1,943.62, which is 0.7% below its opening price. Meanwhile, the US Dollar Index (DXY) Index is currently at the 104.22 level, showing a gain of 0.32% today.

The US reports strong economic activity data.

The US Bureau of Economic Analysis has reported that the Gross Domestic Product (GDP) of the United States expanded by 1.3% quarter-on-quarter in the first quarter of 2023, surpassing the preliminary estimate of 1.1% which was expected to remain unchanged. In contrast, Jobless Claims for the week ending on May 19 came in at 229k, lower than the consensus of 245k. Additionally, Core PCE inflation increased to 5% quarter-on-quarter in Q1, exceeding the expected rate of 4.9%.

After the Federal Open Market Committee (FOMC) expressed concerns about economic activity, positive US data has led investors to believe that there may be more room for another interest rate hike in the upcoming decision in June. As a result, the CME FedWatch Tool now places a 49.3% probability of a 25 basis points hike, compared to yesterday's odds of around 36%.

As a reaction, US bond yields are experiencing gains across the curve. The 10-year bond yield rose to 3.79%, marking a 3.22% increase on the day. Similarly, the 2-year yield stands at 4.46%, showing a gain of 2.61%, while the 5-year yield is at 3.87%, reflecting a gain of 3.22%. These increases in bond yields are further pressuring the price of Gold.

Levels to watch

According to the daily chart, Gold has a bearish outlook for the short term, as indicated by the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD), both of which are pointing down in line with price and suggesting that sellers have control.

Immediate support for Gold is observed at the $1,940.00 level, followed by the 100-day Simple Moving Average at $1,930.00 and the $1,920.00 zone. Moreover, if the precious metal gains momentum, the following resistance levels are seen at the psychological mark of $1,950.00, followed by the $1,970 zone and the 20-day Simple Moving Average at $2,000.00.