Gold prices stabilized near $4,000 an ounce after dropping below this level for the first time since November in the prior session. This stabilization followed the release of U.S. economic data, which saw the personal consumption expenditures (PCE) price index come in lower than anticipated on a monthly basis. This unexpected softness in inflation data caused traders to scale back their expectations for an immediate interest rate hike, providing some support for gold.
Despite the softer inflation print, other economic indicators showed a robust U.S. economy. Income and spending measures were stronger than forecast, suggesting underlying economic strength. Additionally, first-quarter GDP growth was revised upwards to 2.1% against an expected 1.6%, and weekly jobless claims fell to 215,000, below the market's expectation of 225,000. This combination of sticky inflation (Core PCE rose to 3.4% year-over-year) and a strong labor market does not provide the Federal Reserve with a strong reason to ease monetary policy, reinforcing expectations for a rate hike by year-end.
The dollar erased earlier gains and Treasury yields dipped following the PCE data, contributing to gold's steadiness. However, the broader sentiment remains cautious. Analysts from Macquarie note that the focus is on the path of inflation and whether central banks, particularly the U.S. Federal Reserve under new Chair Kevin Warsh, will tighten monetary policy. Macquarie forecasts spot gold to average around $4,641 an ounce in 2026, a 35% year-on-year increase, but anticipates a 9.5% decline to $4,200 in 2027, with a continued downtrend until 2030.
Market experts like Nikos Tzabouras from Tradu.com highlight the Federal Reserve's hawkish shift and the repricing of rate hike expectations as key factors pressuring gold prices. The strong U.S. dollar has been a significant headwind, pushing gold below $4,000 an ounce for the first time in over seven months. Some analysts even suggest a potential slide below $3,500 for gold, especially if the U.S. Dollar Index continues to rally beyond current levels. The market is preserving tactical flexibility, awaiting further clarity from upcoming economic data on the inflation outlook.
From a technical perspective, gold is developing a stabilization pattern, with the $4,000 area acting as a dominant short-term pivot. A sustained recovery above $4015 could lead to a move towards the $4025-$4050 resistance corridor, and potentially to the $4075 participation area. Conversely, a decisive break below the $3980 support level would reinforce a medium-term bearish outlook, potentially exposing gold to further declines as the market adjusts to higher real yields.
