Gold Prices Drop on Profit-Taking, Traders Await US PCE Data
Gold prices (XAU/USD) fell in early European trading on Friday, after previously touching a five-week high of around $3,425. This decline was largely due to profit-taking by investors seeking to secure gains from the previous rally. Furthermore, the strengthening of the US dollar, supported by positive economic data, such as second-quarter Gross Domestic Product (GDP) and weekly initial claims for unemployment benefits, also put pressure on gold, priced in USD.
Nevertheless, market expectations of an interest rate cut by the Federal Reserve (The Fed) at its September meeting continue to support gold as a safe-haven asset. Dovish comments from New York Fed President John Williams have reinforced the view that monetary policy will begin to ease. Lower interest rates typically reduce the opportunity cost of holding non-yielding assets like gold, thereby increasing the precious metal's appeal to investors.
The market's primary focus is currently on the release of the US Personal Consumption Expenditures (PCE) Price Index data for July, scheduled for release on Friday. This data is crucial as it serves as the Fed's primary inflation indicator. Market consensus predicts headline PCE will rise 2.6% year-on-year, and core PCE will rise 2.9% year-on-year. These releases could strengthen expectations of an interest rate cut, which could indirectly support a further rally in gold in the short term.
Technically, although gold prices are currently trading in the daily negative zone, the medium- to long-term trend remains positive. Gold prices remain above the 100-day Exponential Moving Average (EMA), and the 14-day Relative Strength Index (RSI) is at 60.50, indicating continued strong bullish momentum. The nearest resistance is at $3,425, which is also the upper limit of the Bollinger Band. If the price breaks through this level, the next targets are $3,439 and $3,500, which are psychological levels.
Meanwhile, if the price falls further, the nearest support is at $3,373, the low of August 27th. A daily candlestick closing below this level could open the door to weakness towards $3,351 and $3,310. Overall, despite short-term pressure from profit-taking and solid US economic data, long-term sentiment toward gold remains positive, especially if inflation data supports the Fed's monetary policy easing measures. (ayu)
Source: Newsmaker.id
