Gold rises on frail US dollar as investors eye Fed meeting next week

Gold is rebounding from its intraday low of $2,356 and is now trading at $2,385.
The Fed’s preferred inflation gauge has been mixed, approaching its 2% target.
U.S. Treasury yields are falling as prices rise, pointing to the possibility of multiple rate cuts by the Federal Reserve this year.

Gold is trading at $2,385 after falling to a two-week low of $2,353, up slightly by about 0.80% as market participants appear confident that the Federal Reserve will cut interest rates at its September meeting, following a frail inflation report. XAU/USD is trading at $2,385 after rebounding from intraday lows of $2,356.

The U.S. Bureau of Economic Analysis (BEA) revealed that the Fed’s favorite inflation gauge, the Personal Consumption Expenditure Price Index (PCE), was a tenth of a monthly percentage point higher than the May figure. It fell in line with expectations in the 12 months through June, although it is close to the Fed’s 2% target.

The core PCE indicator increased by one tenth each month in June, while year-on-year (y/y) it remained unchanged, exceeding forecasts.

Following the release of the data, US bonds rose, and as a result, US Treasury yields fell, with the 10-year bond falling four and a half basis points to 4.202%.

Sources quoted by Reuters noted: “Today’s mixed or weaker US data suggest that inflation pressures and economic activity are easing, paving the way for the Fed to cut interest rates twice this year.”

The Federal Reserve will make its latest monetary policy decision next week. The central bank is expected to keep rates on hold, but the meeting could pave the way for a first cut at its September meeting.

Daily Market Update: Gold Price Rebounds from Weekly Lows

US PCE rose 0.1% month-on-month (m/m) and 2.5% year-on-year (y/y) in June, both in line with expectations, with the annual rate down from 2.6%.
Core PCE rose 0.2% m/m, beating estimates and the May data. Year-on-year, Core PCE rose 2.6%, higher than forecast and unchanged from the previous month’s reading.
The final result of the University of Michigan consumer sentiment poll was 66.4, a disappointing 66.6.
Inflation expectations fell from 3% year-on-year to 2.9%, while in five-year terms they remained unchanged at 3%.
Data from the Chicago Board of Trade (CBOT) shows that investors are pricing in 55 basis points (bps) of monetary policy easing by the end of the year, as indicated by the December 2024 federal funds rate futures contract.

Technical Analysis: Gold Price Rising But Holds Below $2,400

Gold prices remain bullish, snapping two days of losses and forming a bullish harami two-candle chart. The momentum suggests that buyers are still in charge, as reflected in the Relative Strength Index (RSI) breaking above the 50-level neutral line, opening the door for further gains.

XAU/USD buyers need to reclaim $2,400 before prices break above the psychological $2,450 area. A break of the latter would expose an all-time high (ATH) at around $2,483 and then the $2,500 level.

On the other hand, if XAU/USD continues to fall and falls below the 50-day moving average (DMA) at $2,359, further losses are within reach. The next support will be the July 25 daily low at $2,353. Once these levels are cleared, the 100-DMA will be next at $2,324 before a decline towards $2,300.