Market Overview
Gold prices slightly declined on Friday, trimming some of their weekly gains as Federal Reserve officials gave a more cautious view on potential interest rate cuts. The precious metal had approached $2,400 an ounce earlier in the week, boosted by weak U.S. economic data, but retreated on Thursday and Friday.
US Federal Reserve Officials Warn Against Immediate Rate Cuts
The decline followed warnings from Fed officials against expecting immediate rate cuts. Members of the central bank’s rate-setting committee stressed the need for more substantial evidence of decreasing inflation beyond the slightly soft April inflation reading.
This reduced traders’ expectations for a September rate cut, causing the U.S. dollar and Treasury yields to rebound.
Despite the pullback, softer-than-expected consumer price index (CPI) readings have set gold up for a 0.7% weekly gain. The metal remains near its record high of over $2,430 an ounce, though reaching this level soon appears unlikely.
Economic Data Impacting Gold (XAU/USD) Price
Gold (XAU/USD) showed a bearish trend on Friday, falling back from near $2,400. Earlier gains were driven by softer-than-expected U.S. inflation data for April, which had increased hopes for Fed rate cuts.
However, Fed officials’ cautious stance on maintaining higher borrowing costs has dampened these expectations, strengthening the U.S. dollar and reducing demand for gold.
With no significant U.S. economic data released, market participants are focusing on statements from Fed officials, including Kashkari, Waller, and Daly, speaking later on Friday.
Other Factors Impacting Gold Price
Recent data showed weekly Initial Jobless Claims rose to 222K for the week ending May 11, up from 232K the previous week and above the 220K estimate. Housing Starts increased by 5.7% month-over-month to 1.36 million in April, while Building Permits fell by 3% to 1.44 million.
Atlanta Fed President Raphael Bostic indicated signs of cooling inflation but prefers to wait for May and June data to confirm the trend. Cleveland Fed President Loretta Mester noted that it’s too early to judge if inflation progress has stalled, while Richmond Fed President Tom Barkin emphasized the need to keep borrowing costs high to meet inflation targets.
Financial markets now see a nearly 75% chance of a Fed rate cut in September, up from 65% earlier in the week. Markets are also anticipating full 25 basis point cuts before the end of the year, according to the CME FedWatch Tool.
Gold Prices Forecast
Gold (XAU/USD) is currently trading at $2,378.755, up 0.15% for the day. The 4-hour chart highlights key levels that traders should monitor. The pivot point is at $2,373.92, which serves as a critical support level. Immediate resistance is at $2,395.84, followed by $2,410.62 and $2,425.87.
On the downside, immediate support is found at $2,357.95, with further support at $2,336.74 and $2,318.86.
Technical indicators show a balanced outlook. The 50-day Exponential Moving Average (EMA) is at $2,354.84, while the 200-day EMA stands at $2,312.01. The formation of a Doji candle above the pivot point level of $2,373 is likely to drive a buying trend.
Conclusion: The outlook remains bullish above $2,373.92. A break below this level could trigger a sharp selling trend.
