- Gold price faces selling pressure for the second consecutive day as the US Dollar strengthens.
- A risk-off sentiment and declining US bond yields provide little support for the precious metal.
- Traders await the US PCE Price Index for key market direction.
Gold prices (XAU/USD) continue to decline for the second consecutive day, marking the third negative session in the past four. During Friday’s Asian trading session, gold slipped to a two-week low around the $2,861–2,860 range. The US Dollar (USD) maintains its upward trajectory, extending its recovery from its lowest level since December 10, as expectations grow that the Federal Reserve (Fed) will maintain its hawkish stance amid persistent inflation. This renewed USD strength exerts downward pressure on the non-yielding yellow metal.
Despite the decline, traders are likely to remain cautious ahead of the release of the US Personal Consumption Expenditure (PCE) Price Index, which will provide further clarity on the Fed’s potential rate-cut path. Meanwhile, uncertainty surrounding US President Donald Trump's tariff policies and prevailing risk-off sentiment could lend support to gold as a safe-haven asset. Additionally, a decline in US Treasury bond yields amid global risk aversion may help limit further losses for XAU/USD, making it crucial for traders to exercise caution before taking aggressive bearish positions.
Market Drivers: Gold Under Pressure Amid Renewed USD Buying
- Strong US Data and Fed Stance: US economic data released on Thursday reinforced the case for the Fed to keep interest rates steady, boosting the USD and dragging gold prices lower.
- US GDP Growth and Inflation Concerns: The second reading of US GDP confirmed a 2.3% annualized growth rate in Q4 2024, with the GDP Price Index rising to 2.4% from an initial estimate of 2.2%, fueling concerns over persistent inflation.
- Fed Officials Remain Cautious: Several Fed policymakers, including Kansas City Fed President Jeff Schmid and Cleveland Fed President Beth Hammack, emphasized the need for a restrictive monetary policy to combat inflation, signaling a reluctance to cut rates anytime soon.
- Trump’s Tariff Uncertainty: Investors are wary of the economic impact of Trump’s tariff plans, including proposed levies on Canada, Mexico, and potentially a 25% tariff on EU imports, adding to global economic uncertainty.
- US PCE Data in Focus: Traders are awaiting the release of the US PCE Price Index, a key inflation gauge for the Fed, which could significantly impact USD sentiment and gold price movements.
Technical Outlook: Gold Price Vulnerable to Further Decline
From a technical standpoint, gold has breached the 23.6% Fibonacci retracement level of its December–February rally, reinforcing a bearish bias. Oscillators on the daily chart indicate growing negative momentum, suggesting the potential for a deeper correction.
- Key Support Levels: A decisive break below the $2,856–2,855 region could extend losses toward $2,834, followed by the 38.2% Fibonacci level around $2,815–2,810. If gold falls below the $2,800 threshold, it may confirm a more pronounced bearish trend.
- Resistance Levels: A rebound above the $2,867 mark (23.6% Fibo level) faces initial resistance at the $2,885 region, followed by the psychological $2,900 level. A sustained rally beyond this point could open the door for a retest of the $2,915 horizontal resistance, with potential upside toward the all-time high near $2,956.
Overall, while the gold price remains under pressure due to a strengthening USD and Fed rate hike expectations, market participants will closely monitor US inflation data and geopolitical developments for further direction.
