GOLD PRICE FORECAST: XAU/USD SKIDS BELOW $1,850 AS DXY REFRESHES DAY’S HIGH, US PCE AND GDP IN FOCUS

• Gold prices have established below $1,850.00 amid uncertainty over the US PCE.
• The DXY has recorded a fresh day’s high at 102.16 a risk-on impulse fade.
• A higher US PCE number could compel the Fed to sound extremely hawkish.

Gold price (XAU/USD) has witnessed a steep fall in the early European session after failing to cross the round-level resistance of $1,850.00. The precious metal looks set for a downside move as the US dollar index (DXY) has refreshed its day’s high at 102.16, at the press time. Investors are pouring money into the DXY as the US Personal Consumption Expenditure (PCE) is expected to remain stable at 7%.

Sustainability of the PCE at elevated levels is going to bolster the odds of a 50 basis point (bps) interest rate hike by the Federal Reserve (Fed) in its June monetary policy. Higher PCE by the households advocates higher aggregate demand and eventually mounting inflationary pressures, which could worsen the situation for Fed policymakers.

Apart from that, investors are also awaiting the release of the US Gross Domestic Product (GDP) numbers. The annual US GDP is seen at -1.4% while the GDP Price Index is expected to land at 8%. A higher-than-expected figure could bring more bids to the DXY counter and eventually a sell-off in the gold prices.

GOLD TECHNICAL ANALYSIS

A Bearish Divergence formation on an hourly scale has weakened the gold prices. The precious metal formed a higher high while the momentum oscillator, Relative Strength Index (RSI) (14), formed a lower high, which signaled a loss of momentum. The RSI (14) has slipped below 40.00, which adds to the downside filters. The 20-period Exponential Moving Average (EMA) at $1,852.58 is acting as a major resistance for the gold prices.

Gold hourly chart