Gold Price Forecast: XAU/USD holds onto losses below $4,000 ahead of US PCE Inflation data

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Gold price (XAU/USD) clings to Wednesday’s losses near $3,985 during the European trading session on Thursday. The yellow metal remains under severe pressure as traders seem confident that the next monetary policy move by the Federal Reserve (Fed) will be on the upside.

Gold price trades lower below $4,000 ahead of the US PCE Inflation data for May.
The US core PCE inflation is expected to arrive higher on a monthly as well as an annual basis.
Traders are confident that the Fed will deliver at least one interest rate hike this year.

According to the CME FedWatch tool, the odds of the Fed hiking interest rates this year are almost 82%. While the possibility of at least two interest rate hikes is 42.2%.

The scenario of higher interest rates by the Fed bodes poorly for non-yielding assets, such as Gold.

Hawkish Fed bets have escalated due to accelerating both headline and the core inflation in the past few months due to higher energy prices.

For fresh cues on the current status of inflation, investors await the United States (US) Personal Consumption Expenditure Price Index (PCE) data for May, which will be published at 12:30 GMT. The US core PCE inflation, which is the Fed’s preferred inflation gauge, is expected to arrive higher at 3.4% from 3.3% in April. On a monthly basis, the underlying inflation is estimated to have risen 0.3%, faster than the previous reading of 0.2%.

Gold technical analysis

XAU/USD trades lower at around $3,985.26, extending its slide below the short-term trend as the 20-day Exponential Moving Average (EMA) at roughly $4,247 now caps the upside.

The near-term tone remains bearish, with price entrenched well under this dynamic barrier, while the Relative Strength Index (RSI) around 30 sits in oversold territory, hinting that downside momentum is stretched but not yet reversed.

On the topside, initial resistance is at the March 23 low near $4,100, followed by the 20-day EMA near $4,247, and a daily close above this level would be needed to ease immediate selling pressure and suggest a more meaningful recovery attempt. On the downside, the Gold price could extend its decline towards the October 28 low at $3,886.62, followed by the September 23 high at $3,791.12.

(The technical analysis of this story was written with the help of an AI tool.)

Gold FAQs

Why do people invest in Gold?

Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.

Who buys the most Gold?

Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.

How is Gold correlated with other assets?

Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.

What does the price of Gold depend on?

The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.