Gold price outlook (XAU/USD) dipped to $2,325 early Monday during Asian trading hours. This decline followed the release of April’s U.S. Personal Consumption Expenditure (PCE) data, which showed a slight cooling in inflation pressures. Despite this, ongoing geopolitical tensions in the Middle East could continue to lend support to gold, as it remains a traditional safe-haven asset.
The U.S. PCE inflation report wasn’t strong enough to prompt the Federal Reserve to cut interest rates. Initially, investors expected a rate cut in March, but the timeline has now shifted to September. This delay in the rate cut decision negatively impacts gold, as holding a non-yielding asset like gold becomes less attractive when interest rates remain higher.
April PCE Inflation Data Overview
In April, the U.S. Personal Consumption Expenditure (PCE) price index increased by 0.3% on a month-over-month basis, while the annual PCE figure rose by 2.7% year-over-year, as per Friday’s Commerce Department report. Core PCE, which excludes volatile food and energy prices, saw a 0.2% increase month-over-month in April, following a 0.3% rise in March. The Core PCE price index remained stable at 2.8% year-over-year for the third month in a row.
Impact of Middle East Geopolitical Tensions
Geopolitical tensions in the Middle East, particularly in Gaza, continue to influence gold prices. On Sunday, Israeli Prime Minister Benjamin Netanyahu’s government agreed to U.S. President Biden’s proposal for a cease-fire in Gaza after a weekend of intense airstrikes, according to the BBC. Investors are closely watching these developments, as escalating tensions could drive safe-haven demand for gold.
XAU/USD Overview and Trends
Gold price outlook has seen fluctuations in recent trading sessions. After hitting a low of $2,320, XAU/USD is struggling to regain momentum. The Daily Simple Moving Averages (SMA) indicate the following:
- 20-day SMA: $2,356.94
- 50-day SMA: $2,327.22
- 100-day SMA: $2,196.20
- 200-day SMA: $2,081.98
These trends show that gold is currently below its short-term and medium-term averages.
Key Support and Resistance Levels
Key technical levels to watch include:
- Previous Daily High: $2,359.75
- Previous Daily Low: $2,320.65
- Daily Fibonacci 38.2%: $2,335.59
- Daily Fibonacci 61.8%: $2,344.81
- Daily Pivot Point Support 1: $2,312.08
- Daily Pivot Point Resistance 1: $2,351.18
Conclusion and Additional Resources
The outlook for gold remains cautious as investors keep a close eye on both inflation data and geopolitical events. With the Federal Reserve delaying its rate cut decision, the opportunity cost of holding gold is rising, potentially capping gains. However, any further escalation in geopolitical risks could prompt a flight to safety, benefiting gold prices.
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