Gold (XAU/USD) extended its decline for the second consecutive day on Friday, hitting a two-week low around $2,861 during the Asian session, as the US Dollar (USD) strengthened on expectations that the Federal Reserve will maintain its hawkish policy stance. Persistent inflationary pressures in the US are driving investor flows away from the non-yielding precious metal, adding to the bearish sentiment.
Thursday’s data from the US Bureau of Economic Analysis confirmed that the economy grew at an annualized pace of 2.3% in Q4 2024, in line with earlier estimates. The GDP Price Index rose to 2.4%, surpassing the initial 2.2% reading—signaling persistent inflation. The data reinforced the Fed’s cautious approach to interest rate cuts, bolstering the greenback and weighing on gold prices.
However, lingering uncertainty around US President Donald Trump’s proposed tariffs on Canadian, Mexican, and European imports, combined with a risk-off market sentiment, could offer some support to gold as a safe-haven asset. Meanwhile, falling US Treasury bond yields may help limit further losses. Investors are now turning their attention to the US Personal Consumption Expenditure (PCE) Price Index report, the Fed’s preferred inflation gauge, for clearer signals on future rate policy.
From a technical perspective, gold has broken below the 23.6% Fibonacci retracement level of its December-February rally, increasing the likelihood of further downside. A decisive move below the $2,856-$2,855 horizontal support could accelerate losses towards $2,834 and the 38.2% Fibonacci level at $2,815-$2,810. A sustained drop beneath the psychological $2,800 mark would signal a near-term top and open the door to deeper declines.
On the upside, recovery attempts will face resistance near $2,867, followed by the $2,885 region and the key $2,900 threshold. A break above this level could shift the outlook back in favor of bulls, potentially retesting the $2,915 pivot point and the all-time high of $2,956.
