- Gold outlook remains fragile amid risk-on flows and dollar recovery.
- Mixed US data and a cautious Fed may keep the precious metal sidelined.
- Gold investments are rotating into other precious metals, keeping the yellow metal under pressure.
The gold price extended its downward trajectory on Friday as risk sentiment improved, while the US dollar mildly recovered ahead of key inflation data. Spot gold prices fell around 1% to $3,289, posting a fresh 4-week low, and concluding a second consecutive weekly loss.
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The truce between Iran and Israel stays stable, with businesses and civilians returning to everyday life after two weeks of heightened conflict. The de-escalation has reduced the risk-off flows, as risk appetite has returned to equities and commodity markets.
Adding to the bearish tone of gold, the US dollar slightly recovered, making gold more expensive for holders of other currencies. This comes despite intense selling pressure on the US dollar amid political developments, particularly renewed criticism of the Federal Reserve. According to reports, President Trump may replace Fed Chair Powell by September or October, several months before his term is set to end.
Earlier this week, Powell showed a cautious stance during his testimony before Congress. He dismissed the chances of an immediate rate cut but left the door open depending on the inflation and labor data. That said, yesterday’s macroeconomic data sent mixed signals. The Q1 GDP came in at -0.5%, while weekly jobless claims fell, and durable goods orders data revealed the most substantial number in more than a decade, suggesting economic resilience.
This data ambiguity has created uncertainty in the markets. The CME FedWatch Tool indicates a 70% probability of a rate cut in September, but only an 18% probability for July. Gold will likely remain vulnerable until the Fed’s monetary policy becomes clearer.
Moreover, some of the gold’s outflows are rotating into other precious metals, such as platinum and palladium, as both hit multi-month highs this week. Meanwhile, silver also outperformed gold, hinting at a broader repositioning within the metals complex. However, traders have become cautious ahead of the key US Core PCE Index data.
As the Fed’s preferred gauge of inflation, the Core PCE Index remains in the limelight. Inflation is expected to rise 0.1% month-over-month to 2.6% year-over-year. If the data beats estimates, the Fed Chair’s cautious stance will be reinforced, and rate cuts can be delayed, which may boost the dollar. Contrarily, a weaker print may revive speculation of a cut in July.
Gold Technical Outlook: Bearish Crossovers Dragging Down
The 4-hour chart for gold presents a gloomy picture, as the primary support zone at $3,290-$3,300 has been breached, and sellers are now targeting the next key support level at $3,250. The 50-period and 100-period SMAs formed a crossover that triggered the sell-off, followed by another crossover between the 20-period and 200-period SMAs. If the support at $3,250 fails to hold, the price may further drag down to $3,204.
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Alternatively, finding buyers at the current level may help the metal regain the $3,300 level and recover further to the $3,330 area, as the RSI approaches oversold territory.
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Saqib Iqbal
