Testing Support as US Inflation Data Nears

Gold Price (XAU/USD) Analysis, Price, and Chart

• The US PCE print could trigger a frenzy of short-term volatility in the precious metal.
• Tech support is under pressure.

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The recent rise in US Treasury yields continues to put pressure on gold, and rates are expected to remain high, or even higher, for a while longer, then the path of least resistance for the precious metal appears to be down.

The recent strong reading of US first quarter GDP on Thursday – 2% actual vs. 1.4% expected and 2.6% previously – sent US Treasury yields higher. Markets took yesterday’s numbers as a sign that the US economy is doing better than previously thought, allowing the Federal Reserve to raise interest rates further in its battle against inflation. The latest market forecast is for interest rates to remain elevated for a longer period with the first rate cut being pushed back to the middle of the first quarter of next year. This is in stark contrast to expectations seen 2-3 months ago when interest rate cuts were expected in late third quarter/early fourth quarter of this year.

The market now awaits the latest outlook on US inflation with the Fed’s preferred measure of price pressures, Core PCE, released later today. Any deviation from the market expectation of 4.7% for the core reading will spark volatility in the precious metal, especially with most US markets expected to exit next Monday and Tuesday (Independence Day). This potential lack of liquidity will increase volatility later today.

The daily chart for gold shows the precious metal trading on both sides at $1,904/oz. 61.8% retracement of the movement of September 28 (1615 USD) to May 4 (2081 USD). Below is the 200-day simple moving average at $1860 an ounce. The 50% Fibonacci retracement at $1,848 for the bull. A move higher would find initial resistance at $1.932/oz.

Daily Gold Price Chart – Jun 30, 2023

Chart via TradingView

Retail locations were little changed during the week

Retail trader data shows that 73.17% of traders are net yellow with the ratio of long to short traders at 2.73 to 1, the number of net long traders is down 4.30% compared to yesterday and 2.28% lower than last week, while the number of net long traders is Traders’ short positions are 3.67% higher than yesterday, and 4.74% higher than last week.

We usually take a view contrarian to crowd sentiment, and the fact that traders are holding on suggests that gold prices could continue lower. However, traders net longer than yesterday and compared to last week. Recent changes in feelings warn that the current Gold price trend may soon reverse upward despite the fact that traders remain net buyers.

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