Gold News: Gold Price Rebounds as Weak GDP and Lower Yields Support Bounce

Gold Bounces but the Rally Has a Ceiling

Spot Gold (XAUUSD) is edging higher on Thursday after forming a minor bottom the previous session at $4510.09. The bottom fell short of our short-term support target at $4495.33 to $4401.84. The market also recaptured the long-term 61.8% level at $4541.88, helping to chase out some weak shorts and attract some light buying.

The daily chart indicates there is room to the upside with minor resistance $4700.82 and the main upside target coming in at $4744.34. This is the long-term 50% level. Overcoming this level will indicate the buying is getting stronger. This could trigger an acceleration into the 50-day moving average at $4841.48.

The recent price action suggests the market is rangebound, but the range is tightening. So if you’re patient, there will be a breakout opportunity in the future. The wide range is the 200-day moving average at $4270.95 and the 50-day moving average at $4841.44. The tighter range is the long-term retracement zone at $4541.88 to $4744.34.

Rangebound to me means selling rallies and buying dips, or offering and bidding. When a market is directionally strong, traders buy strength and sell weakness or take out offers and hit bids. As we approach key support and resistance levels, traders have to pay close attention to the price action and the order flow.

Since the 50-day moving average stopped the rally at $4891.54 on April 17, we’ve been in sell the rally mode, which is why I was looking for a pullback into the value zone at $4495.33 to $4401.84. We didn’t quite get there before the turn, but now we’re watching to see if sellers come in to cap this one day rally or if new buyers come in to take out offers.

Dip Buyers Stepped In and Gold Responded

Spot Gold (XAUUSD) dropped to a one-month low the previous session and the buyers showed up almost immediately. By 14:00 GMT Thursday the market had rebounded 1.54% to $4,613.61. I’ve watched this pattern before. When gold stretches too far to the downside in a macro environment still full of uncertainty, value buyers don’t wait for confirmation. They step in and they step in fast. That is what happened Thursday and the move off the low is positioning driven, not a fundamental shift.

Oil Is Keeping a Lid on the Rally

Spot Brent crude oil hit a new war high earlier this week and is still trading near $120.54. I’ve watched oil do this to gold before. The inflation fear that comes with energy at these levels should be a tailwind for gold. It’s not. The reason is the Fed. Oil this high keeps rate cut expectations off the table and a Fed that can’t cut is a bigger problem for gold than inflation is a help. That is the trap gold is sitting in right now and nothing in Thursday’s session changed it.

The Iran situation is not resolved and the market knows it. Stalled negotiations, ongoing supply disruption risk, and a prolonged U.S. blockade affecting Iranian exports are all keeping energy markets tight. None of that is going away this week and none of it gives the Fed room to sound dovish.

The Fed Just Got More Complicated

This was the most divided Federal Reserve decision since 1992. Three officials dissented against signaling future rate cuts. The market reacted immediately. Rate cuts for this year are now fully priced out. There is also a 30% chance of a rate hike by March 2027, up from 5% the day before. That is a significant repricing in a short period and Spot Gold (XAUUSD) is absorbing it.

As a non-yielding asset gold struggles when rate expectations move higher. The inflation argument supports it on one side. The higher for longer argument works against it on the other. Right now the rate argument is winning.

Yields and GDP Giving Gold Some Room

The 10-Year U.S. Treasury yield pulled back to 4.384% Thursday and the 2-Year dropped to 3.887%. Lower yields reduce the cost of holding gold and that is part of what is driving today’s bounce. First quarter GDP came in at a 2% annualized pace, missing the 2.2% forecast. Softer growth data adds to the uncertainty picture and uncertainty keeps gold in play even when rates are working against it.

Headline Personal Consumption Expenditures rose 0.7% in March, pushing the annual rate to 3.5%. Core Personal Consumption Expenditures came in slightly lower but remains well above the Fed’s 2% target. Persistent inflation and slowing growth at the same time is not a clean setup for anything, including gold.

What I’m Watching

The value zone at $4,495.33 to $4,401.84 held as support and the market has bounced back above $4,541.88. That is the minimum I needed to see to stay cautiously bullish on the short-term picture. The next test is whether sellers come in to cap this rally before it reaches $4,700.82. If they do, we go back to range trading. If new buyers step in and push through that level, $4,744.34 becomes the target and the 50-day moving average at $4,841.48 comes into view after that.

The 10-Year U.S. Treasury yield and Spot Brent crude oil are the two numbers I am watching. They will decide whether this bounce has legs or fades back toward the lows.

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