Gold price remains near multi-week lows and appears vulnerable below the 50-day SMA

The gold price is hovering near the three-week low reached on Friday.
The Fed’s bets on interest rate cuts are weakening the USD, which, along with geopolitical risks, provides support.
Positive risk tone limits growth ahead of global PMIs and US ISM PMI.

The gold price (XAU/USD) is struggling to gain significant traction during Monday’s Asian session amid a confluence of divergent forces, falling near a three-week low reached on Friday. Growing acceptance that the Federal Reserve (Fed) will begin cutting interest rates later this year, reinforced by signs of easing inflationary pressures in the United States (US), continues to weaken the US dollar (USD). This, combined with continued geopolitical risks, are proving to be key factors in providing some support to the safe-haven precious metal.

However, the positive impact of the gold price remains narrow due to the overall positive risk tone and hopes for a ceasefire in Gaza. Traders also seem reluctant and prefer to wait for this week’s release of vital US macro data scheduled for the beginning of the modern month, including Friday’s Nonfarm Payrolls (NFP) report. In addition, key risk factors related to central bank events – Wednesday’s decision by the Bank of Canada (BoC) and Thursday’s meeting of the European Central Bank (ECB) – should have an impact on the unprofitable yellow metal.

Daily Digest Market Changes: The gold price is struggling to attract buyers despite a weaker US dollar

The US inflation report was in line with estimates and reinforced expectations that the Federal Reserve will cut interest rates this year, which weakens the US dollar and acts as a tailwind for the gold price.
The U.S. Bureau of Economic Analysis (BEA) reported on Friday that the Personal Consumer Expenditures (PCE) price index rose 0.3% in April and held steady at 2.7% year over year, in line with consensus estimates.
The core PCE price index, which excludes volatile food and energy prices, was also in line with expectations, up 2.8% year-over-year, while personal income and personal expenses rose 0.3% and 0.2%, respectively.
These data raise forecasts of an imminent Fed interest rate cut this year and lead to a further decline in US Treasury yields, keeping dollar bulls on the defensive and supporting the unprofitable yellow metal.
Moreover, tensions around the Middle East are proving to be another factor limiting the negative impact on the safe-haven XAU/USD, although the generally positive tone in equity markets should limit this trend.
China’s Caixin S&P Global Manufacturing Purchasing Managers’ Index (PMI) rose to 51.7 in May from 51.4 the previous year and showed signs of stabilization in the world’s second-largest economy, boosting investor confidence.
Moreover, the latest optimism surrounding the modern Gaza ceasefire plan announced by US President Joe Biden is keeping traders from making aggressive, bullish bets around the commodity.
Market participants are now eagerly awaiting the release of the final prints of the global manufacturing PMI on near-term trading opportunities ahead of the release of the US manufacturing PMI later in the day.
This week, investors will also face vital macro releases from the United States, including the NFP report and key risk factors related to central bank events – Wednesday’s BoC decision on monetary policy, followed by Thursday’s ECB meeting.

Technical analysis: Gold price may weaken further after decisive break of support at $2,320

From a technical perspective, some follow-on selling below the $2,320 level will confirm a break through the 50-day elementary moving average (SMA) and pave the way for deeper losses. Given that the oscillators on the daily chart have just started gaining strength, the gold price may then weaken further below the $2,300 round mark and test the next major support near the $2,285-2,284 horizontal zone.

On the other hand, momentum beyond the $2,343-$2,344 area is likely to face stiff resistance near the $2,360 area (Friday’s high). Some further purchases above the USD 2,364 level will be seen as fresh stimulus for bullish traders and will push Gold towards the intermediate USD 2,385 threshold on the way to the USD 2,400 level. The momentum could reach the $2,425 zone on its way to the $2,450 region or the all-time high reached in May.