Gold Prices Hover Below $3,300: Will US PCE Data Spark a Breakout?

Gold prices (XAU/USD) are trading below the $3,300 mark during the European session on Friday, showing consolidation as traders remain cautious ahead of the US Personal Consumption Expenditure (PCE) Price Index release later today.

The US dollar has seen modest buying interest amid repositioning trades, putting pressure on the precious metal.

However, a mix of supportive factors, including renewed trade tensions, geopolitical uncertainties, and expectations of Federal Reserve rate cuts, is limiting deeper losses for gold, often regarded as a safe-haven asset. The market is poised for potential volatility depending on the inflation data outcome.

Factors Influencing Gold Prices

The US dollar's slight recovery has weighed on gold prices, following an overnight pullback that lacked follow-through momentum. On Thursday, a federal appeals court reinstated trade tariffs imposed by President Donald Trump, reversing a trade court’s ruling that had deemed them illegal, adding uncertainty to global markets.

Geopolitical tensions also persist, with the ongoing Russia-Ukraine conflict showing no immediate resolution despite Russia’s proposal for peace talks in Istanbul next week, and the Middle East remaining volatile as Hamas rejected a US ceasefire proposal for Israel.

Meanwhile, market expectations of Federal Reserve rate cuts, with at least two 25-basis-point reductions anticipated by year-end, are capping the US dollar’s upside, providing a tailwind for gold.

Recent financial data indicates gold ETF holdings have risen by 1.2% this month, reflecting increased investor interest in safe-haven assets amid these uncertainties.

ALSO READ | Gold Prices Slide as Trump’s EU Tariff Delay Cools Safe-Haven Demand, Yet U.S. Fiscal Woes Persist

Fed Policy and Upcoming PCE Data

The Federal Reserve’s monetary policy outlook remains a key driver for gold prices. Minutes from the Fed’s May meeting revealed a cautious stance, with officials adopting a wait-and-see approach due to economic and trade policy uncertainties.

Chicago Fed President Austan Goolsbee suggested that avoiding tariffs could pave the way for rate cuts, while San Francisco Fed President Mary Daly indicated that two rate cuts this year are plausible if inflation cools and the labor market remains stable.

Dallas Fed President Lorie Logan emphasized the Fed’s readiness to act if economic risks shift. Fed Chair Jerome Powell, after meeting with the President on Thursday, reiterated a data-driven approach to policy decisions.

The upcoming PCE Price Index, the Fed’s preferred inflation gauge, is expected to show a year-over-year core inflation rate of 2.7% for April 2025, according to recent forecasts, and could significantly influence rate-cut expectations and gold price movements.

Did You Know?
Gold has been a safe-haven asset for centuries, with its price often rising during times of geopolitical tension, as it did during the 2014 Crimea crisis when prices surged by 12% in a month.

Technical Outlook for Gold

From a technical perspective, gold failed to break the $3,325 to $3,326 resistance zone on Thursday and then dropped below $3,300, tilting the near-term bias in favor of bears.

The 4-hour chart shows oscillators gaining negative traction, suggesting potential for further declines. A decisive break below the $3,280 support could lead to a slide toward the overnight low of $3,246 to $3,245, with $3,200 as the next key level.

Conversely, a sustained move above $3,325 to $3,326 could negate the bearish outlook, potentially driving prices toward the $3,345 to $3,350 zone, and even $3,400 if momentum builds.

This highlights trader anticipation, as many expect a breakout in either direction following the PCE data release.