Gold Price Firms Modestly As Key Fed Inflation Guage Shows a Decline

Summary:

The technical picture on the XAU/USD pair is that of a bearish pennant, which suggests that we could see lower gold prices.

Gold price rose modestly on Friday after a key Fed inflation gauge dropped by 2 points, tempering bets that the Fed could engage in early tapering/rate increases.

The FOMC statement of 16 June had contained language that the markets deemed hawkish, sending gold prices plummeting. This week, the FOMC Chair and several governing council members have walked back on some of that language, suggesting that inflationary pressures remained transitory. Today’s data, which showed a drop in the Core PCE Price Index from 0.7% to 0.5% (consensus of 0.6%), seems to support the recent body language from the

Fed, allowing the gold price to register its first day of gains since Tuesday. However, gains remain modest and have stalled at the resistance seen at 1789.49, heading into the weekend.

Technical Levels to Watch

The technical picture on the daily chart shows gold price in a bearish pennant pattern. This is suggestive of further selling pressure on the XAU/USD. A breakdown of the pennant allows bears to target 1763.30, with additional targets at 1741.00 and 1719.13. The latter could be the endpoint of the measured move from the pennant.

On the other hand, a break above 1789.49 invalidates the pennant and opens the door towards 1800.00. Additional targets to the north include 1815.20 and the price wall at 1828/1840.