• Despite the day’s gains, XAU/USD is set to close a third straight week of losses near the $1,920 area.
  • Falling yields amid soft PCE numbers weakened the dollar to the benefit of gold prices.

On Friday, the XAU/USD gold spot traded up nearly 0.50% and jumped near the $1,920 area. Soft Personal consumer spending from the US supported a decline in US yields and thus a weaker US dollar, which supported the yellow metal. Additionally, gold’s short-term trajectory will be determined by bets on the Federal Reserve’s (Fed) next decision, which will impact key labor market data released next week.

US reported soft PCE numbers. Eyes on labor market data

According to the US Economic Bureau Analysis showed that Core Personal Consumption Expenditures (PCE), the Federal Reserve’s preferred measure of inflation, unexpectedly slowed to 4.6% year-on-year in May. Attention now shifts to labor market data as investors try to decipher the Fed’s next moves after Chairman Powell noted that the Federal Open Market Committee (FOMC) is forecasting another hike, driven by a hot labor market.

In this sense, Non-agricultural wages (NFP) is expected to fall to 200 thousand in June. In addition, average hourly earnings are expected to remain stable at 4.3% year-over-year and the unemployment rate at 3.7%.

So far, markets are discounting a 25 basis point (bps) hike at the Fed’s next meeting in July, but are not in favor of a second hike Jerome Powell indicated will come. It’s worth noting that non-yielding yellow metals tend to be negatively correlated with interest rates, so hawkish bets on the Fed would add additional selling pressure.

XAU/USD Levels to Watch

The technical outlook on the daily chart for XAU/USD remains neutral to bearish in the short term. The Relative Strength Index (RSI) is holding below its midline but with a positive slope, while the Moving Average Convergence Divergence (MACD) is printing rising red bars.

Support levels to watch: $1,905, $1,900, $1,890.
Resistance levels to watch: $1,930, $1,938 (20-day SMA), $1,945 (100-day SMA)

XAU/USD Daily Chart

Source Link