Gold price forecast: US GDP data in focus as XAU traders eye Powell

Gold prices trade higher ahead of Federal Reserve Jerome Powell’s speech; a US GDP update and PCE inflation data may influence bullion until then and XAU/USD rises to potential resistance at the 38.2% Fibonacci retracement.

When the Federal Reserve kicked off its rate hiking cycle on March 17, gold was trading around 1,930. Today, after 225 basis points of tightening, it is trading near 1,754. An aggressive Federal Reserve has pushed yellow metal prices lower, even amid the steepest price gains seen across the globe in decades. Gold is seen by many as an inflation hedge, but Treasury yields and the US dollar have attracted more attention.

Gold prices, along with US equity indexes, rose from mid-July to early August on bets that the Federal Reserve would start to ease its trajectory on tightening policy through rate hikes. This boded well for gold because a less dovish Fed is conducive to Treasury buying, which lowers yields, and risk-taking, which typically weighs on the safe-haven US dollar. However, traders turned cautious as the Jackson Hole Economic Symposium approached.

The cautious market tone will likely prevail until Mr. Powell takes the podium. Being a data-dependent Fed, however, makes this week’s remaining US economic data relevant to the Fed Chief and thus gold prices. The US’ second estimate Q2 GDP growth rate is expected to improve slightly to -0.7% from -0.9% q/q, according to a Bloomberg survey. A surprise beat on that expectation may weigh on gold, as a softer-than-expected GDP contraction would ease the pressure to capitulate on the Fed. And hours before the big speech, PCE inflation data for July will cross the wires. Traders see core PCE falling to 4.7% y/y in July from 4.8%.

Gold technical outlook

XAU/USD bounced off the 23.6% Fibonacci retracement level, carrying prices higher to the 38.2% Fib. Prices pinged that Fib level this morning but failed to clear it. A break higher would threaten the falling 50-day Simple Moving Average. Upside momentum is waning via the MACD oscillator, suggesting that a drop back to the 23.6% Fib may be more likely.

Gold daily chart

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