Gold price rebounds due to soft US GDP fueling rate cut speculation

• Gold bounces to $2,347 from daily lows of $2,322, up 0.41%.
• Slower US GDP growth and rising unemployment claims weaken the Greenback.
• Traders eye April’s PCE inflation data, which could dictate XAU/USD’s direction.

Gold prices trimmed some of Wednesday’s losses and rose 0.41% on Thursday after the US Gross Domestic Product (GDP) showed the economy is slowing, reigniting hopes that the US Federal Reserve (Fed) may cut rates later in the year.

The XAU/USD trades at $2,347, bouncing off daily lows of $2,322. The yield of the US 10-year note collapsed almost seven basis points (bps) to 4.548%, while the Greenback followed suit. The US Dollar Index (DXY) lost 0.43%, at 104.67.

The US economy grew at a slower rate than in the fourth quarter of last year, indicating that higher borrowing costs set by the Fed are taking their toll on the economy. Meanwhile, the US Department of Labor revealed an increase in the number of people applying for unemployment benefits.

Recently, New York Fed President John Williams grabbed the headlines. He said that monetary policy is well-positioned, that inflation is too high, and that he doesn’t feel urgency to slash interest rates. He added that inflation would reach the Fed’s 2% goal in early 2026.

Even though he was hawkish, Gold prices barely heeded his words, standing at current spot prices. The US housing market is also weakening, according to the Pending Home Sales data revealed by the National Association of Realtors.

Ahead in the week, traders are anticipating the release of April’s Personal Consumption Expenditures (PCE) Price Index, which is the Fed’s preferred measure of inflation. The core PCE figure is expected to be 2.8% YoY, while the headline PCE is projected to increase by 0.3% MoM.

Daily digest market movers: Gold price rises as US Treasury yields retreat from multi-week high

• Gold prices advance after bouncing off 50-day Simple Moving Average (SMA) at $2,324.
• US economic docket includes second estimate of Gross Domestic Product (GDP) for Q1 2024, which showed a decline from 3.4% to 1.3% quarter-over-quarter and aligned with analyst expectations.
• Initial Jobless Claims for the week ending May 25 increased to 219K, slightly above the consensus estimate of 218K and higher than the previous week's reading of 216K.
• Pending Home Sales for April tumbled from 3.6% to -7.7% MoM and, on an annual basis, plunged -7.4% from a 0.1% expansion.
• Fed funds rate futures estimate just 27 basis points of interest rate cuts in 2024, according to data provided by the Chicago Board of Trade (CBOT).

Technical analysis: Gold price climbs, yet remains below $2,350

Gold’s rally is set to continue, yet buyers are struggling to crack the psychological $2,350 mark, which could pave the way for further gains. Short-term momentum favors sellers as the Relative Strength Index (RSI) remains bearish after punching below the 50 midline on Wednesday.

Further gains could be anticipated if XAU/USD buyers reclaim the psychological mark of $2,350. The next target would be the $2,400 level, followed by the year-to-date high of $2,450 and, subsequently, the $2,500 mark.

Conversely, if XAU/USD falls below the 50-day Simple Moving Average (SMA) at $2,321, that could pave the way to challenge the May 8 low of $2,303, followed by the May 3 cycle low of $2,277.