- Gold prices fell in the early Asian session on Friday.
- Stronger US GDP growth has pressured gold prices downward, although increasing expectations for a Fed rate cut may help curb the decline.
- Attention is focused on the US PCE inflation data, which will be released later on Friday.
Gold prices (XAU/USD) are losing momentum as the US Dollar (USD) strengthens on Friday. The positive US growth report and Initial Jobless Claims have dampened expectations for a deeper rate cut by the US Federal Reserve (Fed) in September, putting pressure on gold, which yields no income. However, rising geopolitical tensions in the Middle East and the ongoing conflict between Russia and Ukraine may increase safe-haven demand, potentially benefiting gold.
Investors are closely watching US inflation data for further clues about the possible extent of Fed rate cuts. The core Personal Consumption Expenditures (PCE) Price Index, the Fed's preferred inflation measure, is expected to rise by 2.7% YoY in July, up from 2.6% in June. A lower-than-expected PCE reading could prompt the Fed to initiate a rate-cutting cycle, which would be supportive for XAU/USD.
Daily Digest Market Movers: Gold prices decline, but anticipated Fed rate cuts could limit further losses
- Russia conducted multiple air strikes on Ukraine this week, with estimated costs to Moscow reaching £1.1 billion. Meanwhile, Ukraine has heightened vigilance along its border with Belarus following a recent troop buildup there, according to Sky News.
- The US Gross Domestic Product (GDP) grew at an annual rate of 3.0% in the second quarter (Q2), according to the Department of Commerce's revised estimate released on Thursday. This figure exceeded both the initial estimate of 2.8% and market expectations.
- US weekly Initial Jobless Claims for the week ending August 24 fell to 231K from 233K the previous week, coming in below the market consensus of 232K.
- Atlanta Fed President Raphael Bostic indicated on Thursday that it might be "time to move" on rate cuts due to cooling inflation and rising unemployment, though he awaits more evidence from the upcoming monthly jobs report and two inflation reports before the next Fed meeting.
- The market is currently pricing in a 66% chance of a 25 basis point (bps) rate cut in September, with a 34% chance of a larger rate cut, down from 36.5% prior to the US GDP data, according to the CME FedWatch Tool.
Technical Analysis: Gold prices maintain a bullish outlook over the long term
The Gold price edges lower on the day. The precious metal remains capped under a five-month-old ascending channel upper boundary and the all-time high. However, the overall outlook of the precious metal is strongly in favor of the bulls on the daily timeframe, with the price holding above the key 100-day Exponential Moving Average (EMA). Additionally, the 14-day Relative Strength Index (RSI) stands near 60.75, suggesting potential bullish momentum in the near term.
The key resistance level for the yellow metal is seen near the confluence of the all-time high and the upper boundary of the trend channel of $2,530. Further north, the next hurdle emerges at the $2,600 psychological mark.
On the other hand, the initial downside target for XAU/USD could be the $2,500 round figure. A decisive break below this level could expose further downside potential towards $2,432 (the low of August 15) en route to $2,382 (100-day EMA).
