Gold Steadies After US Growth Slows, Eyes on Inflation Data

Market Dynamics:

• Weaker US Growth Data: The recent downward revision of US first-quarter GDP growth to 1.3% has fueled optimism that inflation will remain under control, potentially paving the way for lower interest rates. This benefits gold, as a non-yielding asset.
• Shifting Fed Expectations: Comments from several Fed officials indicating resistance to further rate hikes and confidence in achieving the 2% inflation target have eased concerns about aggressive monetary tightening.

Technical Analysis:

• Bear Flag Breakout: Gold's price action suggests a potential breakout from a bearish flag chart pattern, with a downside target zone between $2,303 and $2,295.
• Short-Term Downtrend: The 4-hour chart indicates a sequence of declining peaks and troughs, suggesting a short-term downtrend.
• Medium- and Long-Term Uncertainty: While the medium and long-term trends remain bullish, recent price movements don't support an immediate resumption of the uptrend. A decisive break above the $2,385 level would be needed to signal a potential reversal.

US PCE Data in Focus:

• Friday's release of US Personal Consumption Expenditure (PCE) data - the Fed's preferred inflation gauge - is crucial. Although analysts expect it to be largely in line with the CPI and PPI figures, any significant deviations could trigger market volatility.

Asian Demand as a Hedge:

• Daniel Ghali of TD Securities points out that Asian demand for gold as a hedge against currency depreciation is also a factor influencing the price. This demand might limit the downside even if the US Dollar strengthens.

Gold prices are currently in a wait-and-see mode. The upcoming PCE data will be closely watched for further clues about the Fed's monetary policy direction. While technical indicators suggest a potential short-term downtrend, the medium- and long-term outlook remains uncertain. Asian demand for gold as a currency hedge adds another layer of complexity to the price dynamics.