- Gold remains on the back foot for third consecutive day, refreshes intraday low of late.
- Comments from US President Biden, Treasury Secretary Yellen renew US dollar demand.
- Quiet session in Asia, pre-data/event cautious sentiment adds downside pressure on gold prices.
- US Core PCE Price Index, stimulus news should be observed for fresh impetus.
Update: Gold price is holding the lower ground near $1890, having tested Thursday’s low of $1888, as the US dollar remains firmer amid higher Treasury yields. Hopes for a bigger-than-expected US stimulus package continue to keep the global stocks in a sweet spot, with President Joe Biden aiming for $6 trillion in spending plans ahead of the budget release later on Friday. Gold traders also eagerly await the release of the Fed’s preferred inflation gauge, the PCE Price Index for the next direction in prices. Strong US Core PCE inflation figures could reinforce the Fed’s tapering expectations, boosting the yields at the expense of gold.
Gold (XAU/USD) justifies the double whammy of uncertainty over US inflation and stimulus by printing a three-day losing streak, down 0.20% intraday around $1,890 ahead of Friday’s European session. Market’s cautious sentiment back the US Treasury yields, which in turn weigh on the gold prices by the press time, despite the latest pullback from $1,889.
Test time for Biden, Fedspeak…
US President Joe Biden is ready to take the bold move of announcing a $6.0 trillion budget despite struggling to pass the $1.7 trillion spending plans, signaled by the New York Times (NYT). In doing so, Biden aims to lead the global economic recovery while staying ready to ignore the record budget, at least for now. However, Republicans pour cold water on his face while presenting a $1.00 trillion counteroffer. Hence, Today’s budget announcement, followed by a political drama will be entertaining for the markets as Biden’s rejection of the $1.0 trillion offer, also trimming the $6.0 trillion proposal only a bit, could propel risk sentiment and gold prices.
On the other hand, US Personal Consumption Expenditure (PCE) Price Index for April will also be the key amid the current reflation chatters. While the headline figure is no doubt important, gold traders will keep their eyes on the Core PCE Price Index due to its status as the Fed’s preferred gauge of inflation.
Forecasts suggest, the headline number to ease from 2.3% to 2.2% but the Core reading, the key one, is expected to jump from 1.8% to 2.9%, which in turn could keep the reflation fears on the table and put a safe-haven bid under the US dollar. The same should weigh on the gold prices afterward.
It should be noted that US Treasury Secretary, also the ex-Fed Boss, Janet Yellen joined her old pals while suggesting the inflation pressure being transitory, also rejecting the tapering concerns. Though traders aren’t convinced and hence they keep the US Treasury yields up for the second consecutive day by the press time, which in turn drags the gold prices below $1,900.
Moving on, gold traders will have to keep their eyes on the inflation outcome, up for publishing at 12:30 PM GMT, as well as changes in the stimulus figures during the budget announcement, anticipated today, to forecast near-term moves of the commodity. In doing so, US Treasury yields could work as a strong catalyst.
A clear downside break of the two-week-old rising trend line directs gold sellers towards another important support line close to $1,868. However, a 10-day SMA level near $1,882 can act as immediate support.
It’s worth noting that a bearish impulse below $1,868 will make the gold prices vulnerable to decline towards $1,845 support convergence, including 21-day SMA and early May tops.
On the contrary, corrective pullback beyond the support-turned-resistance line near $1,897 will have to provide a daily closing above $1,900 to keep the gold buyers hopeful.
Should the market optimism for gold stay intact past $1,900, the $1,907 and the latest high around $1,914 can test the bulls before directing them to the yearly top surrounding $1,960.
To sum up, gold witnesses a pullback towards the short-term key support line but the bears aren’t allowed a free pass.
Gold: Daily chart
Trend: Further weakness expected
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