XAU/USD loses battle from $1820, focus on US Core PCE price index

  • Gold price settles below $1,820.00 on hawkish comments from Western central banks.
  • The DXY is aiming to regain its 19-year high as the US PCE climbed to 7.1%.
  • The precious metal hovers around the lower part of the descending triangle.

The price of gold (XAU/USD) turned sideways after posting wild swings in the New York session. The precious metal is hovering in a narrow range of $1,814.96-$1,819.13 after reversing its gains. Federal Reserve (Fed) Chairman Jerome Powell’s speech brought a sense of volatility in gold prices and his hawkish commentary pledged to bring price stability to the US economy.

Investors should start pricing in a consecutive 75 basis point (bp) rate hike as rising inflation has become invincible for US households and they must deal with its consequences. Comments by European Central Bank (ECB) President Christine Lagarde that returning to a lower inflation rate is not possible now. The comment spooked the FX arena and risk-sensitive currencies took a hit.

Meanwhile, the US Dollar Index (DXY) is aiming to recover to its 19-year high at 105.79 on the back of improving personal consumption spending in the US on a quarterly basis. US PCE landed 7.1% from the previous print of 7%. No wonder, the improvement in the PCE must bet on higher prices rather than higher demand. Going forward, the focus will remain on the Core PCE price index, which may decline to 4.7% from the previous print of 4.9% on an annual basis.

Gold technical analysis

Gold prices are trading near potential support in the descending triangle pattern. The downward sloping trendline of the above mentioned chart pattern is drawn from the June 16 high at $1,857.58 while horizontal support is placed from the June 16 low at $1,815.73 $. The 20-period exponential moving average (EMA) at $1,819.36 is acting as a major resistance for the counter. Meanwhile, the Relative Strength Index (RSI) (14) is holding above the 40.00 levels, however, a slide below it will bring more weakness to the shiny metal.

Gold hourly chart

Richard L. Militello