Gold experienced a notable decline after surpassing the $2,400 mark, halting a two-week winning streak and signaling a loss of bullish momentum in the near term. The trajectory of XAU/USD in the upcoming week is expected to be influenced by the release of the Personal Consumption Expenditures (PCE) Price Index data and comments from Federal Reserve (Fed) officials.
The week commenced with Gold reaching a new record high of $2,450 in response to escalating geopolitical tensions following the unfortunate helicopter crash involving Iran’s President and Foreign Minister. However, as market sentiment improved later in the day, XAU/USD retraced a significant portion of its gains and closed only marginally higher.
The following day saw the US Dollar (USD) maintaining its strength against major currencies, driven by hawkish remarks from Fed policymakers, including Atlanta Fed President Raphael Bostic and Fed Governor Christopher Waller. These comments contributed to Gold’s downward trajectory, exacerbated by a resurgence in US Treasury bond yields.
Wednesday witnessed a continuation of Gold’s decline, spurred by technical selling pressure after breaching the crucial $2,400 level. The release of minutes from the Fed’s April meeting further weighed on XAU/USD, with indications that some policymakers were open to reconsidering rate hikes if necessary.
Thursday brought forth positive economic data, with S&P Global reporting a robust expansion in US private sector activity. The upbeat Purchasing Managers’ Index (PMI) figures propelled the USD higher, causing Gold to slump below $2,330, marking its lowest level in two weeks.
Despite the prevailing risk-off sentiment, Gold managed to stabilize towards the end of the week, aided by a modest improvement in market sentiment.
Looking ahead, Gold investors are poised to closely monitor comments from Fed officials, particularly in light of market expectations regarding the policy rate. The absence of high-impact economic releases in the first half of the week places added emphasis on Fed rhetoric. Additionally, the release of the second estimate of first-quarter Gross Domestic Product (GDP) data and the April PCE Price Index figures will be pivotal in shaping market sentiment towards Gold and the USD. A positive revision to GDP data or an increase in the core PCE Price Index could bolster the USD and weigh on Gold, while a lower-than-expected reading may provide support for the precious metal.
