Gold Under Pressure as Safe-Haven Demand Wanes Ahead of Key US Inflation Data
Gold prices are currently weakening, trading below $3,300 and reaching a four-week low, largely due to diminishing safe-haven demand following the Israel-Iran ceasefire. However, various factors may prevent significant further declines, particularly as traders await crucial US inflation data. The upcoming US Personal Consumption Expenditure (PCE) Price Index release is pivotal, as it will offer insights into the Federal Reserve's (Fed) interest rate strategy, directly influencing the US Dollar (USD) and, consequently, gold. Despite immediate pressures, expectations of Fed rate adjustments, combined with concerns over the Fed's autonomy, are keeping the USD subdued, which could offer some support for gold.
Recent US economic data presents a mixed view. The US economy contracted more than initially thought in early 2025, with Gross Domestic Product (GDP) falling by 0.5% during January-March, influenced by restrained consumer spending and tariff-related issues. Conversely, initial unemployment claims decreased, yet continuing claims rose, suggesting a somewhat sluggish hiring environment. This has led to speculation that the US Unemployment Rate could increase, potentially prompting the Fed to resume rate cuts in July and further reduce borrowing costs this year. This outlook has pushed the US Dollar to its lowest point since March 2022, which could benefit non-yielding gold.
Investors are keenly anticipating the PCE data for clues on the Fed's policy path. Analysts project a slight monthly increase in the core PCE Price Index and an annual rise of 2.6% in May. A stronger reading could affirm Fed Chair Jerome Powell's cautious approach to rate cuts, potentially strengthening the USD. Powell has emphasized waiting to cut rates until the impact of tariffs on consumer prices is clearer, a stance that has drawn criticism and fueled discussions about a potential successor. Such concerns about the Fed's independence might limit any immediate positive USD reaction to inflation data, suggesting an upward trend for gold, with any dips seen as buying opportunities.
Gold, trading near $3,291 an ounce, is heading for a second consecutive weekly loss, declining by more than 2%. The metal has largely been confined to a narrow range this week, experiencing a slump on Tuesday after the Middle East ceasefire, which fostered a ""risk-on"" market mood. This sentiment was further bolstered by optimistic trade discussions between the US and major partners. Despite recent drops, gold has gained more than a quarter this year and remains approximately $200 below its April record high, supported by geopolitical and trade tensions, robust central bank purchases, and increasing anticipation of further monetary easing from the Fed.
From a technical perspective, a slide below the 200-period Simple Moving Average (SMA) on the 4-hour chart could signal further declines for gold, especially after breaking a short-term ascending channel. With daily oscillators showing negative momentum, gold could head towards the $3,245 area, potentially falling to the $3,210-$3,200 support zone and then the $3,175 level. Conversely, the $3,324-$3,325 area acts as immediate resistance, followed by the $3,350 overnight swing high. The trend-channel support breakpoint, around $3,368-$3,370, should limit any significant gains. However, a sustained breach above this could allow gold to reclaim $3,400, negating the current negative outlook and shifting momentum towards bullish trends. On the MCX, gold futures for August opened lower at ₹96,261 per 10 grams, trading down by more than 1% at ₹96,100, falling below the ₹96,000 mark intraday. Silver also experienced a slight decline. The market is closely watching the US core PCE data for insights into the Fed's monetary policy, with a high probability of a Fed rate cut commencing in September.
