Gold prices saw a modest uptick of 0.69% as the US Dollar Index (DXY) weakened following the release of lackluster US Gross Domestic Product (GDP) data.
Despite the GDP report indicating below-expectation growth in Q1 output, it also underscored persistent inflationary pressures. Consequently, the likelihood of a summer interest rate cut by the Federal Reserve (Fed) diminished. Nevertheless, the DXY depreciated, while gold, perceived as a hedge against inflation, experienced an ascent.
Meanwhile, data from the Hong Kong Census and Statistics Department revealed a 40% surge in China’s net gold imports via Hong Kong in March compared to the previous month. China, being a major bullion consumer, holds sway over gold prices. Notably, the central bank of China bolstered its reserves by 160,000 troy ounces of gold in March. The People’s Bank of China (PBOC) emerged as the largest official purchaser of gold in 2023. Thus, despite expectations of sustained elevated US interest rates, gold prices find support from inflationary concerns and robust demand in the physical market.
During the Asian and early European trading sessions, XAU/USD registered slight gains. However, market attention remains fixated on the US inflation data. The Bureau of Economic Analysis is poised to unveil its Personal Consumption Expenditure (PCE) Price Index at 12:30 p.m. UTC, which is closely monitored as the Fed’s preferred gauge of inflation.
David Meger, Director of Metals Trading at High Ridge Futures, remarked, “After a very dramatic move higher in gold over the course of the last several weeks, it is in the midst of a consolidation. Certainly, that could change in the short term if we see an inflationary print that comes out very benign and inflation is much more reduced.”
Indeed, a scenario where core PCE figures fall below expectations could propel XAU/USD above $2,350. Conversely, higher-than-anticipated figures might trigger a correction towards $2,290.
According to Reuters analyst Wang Tao, “Spot gold is biased to break resistance at $2,351 per ounce and rise into the $2,364–$2,377 range.”
