Gold Price Forecast: XAU/USD holds steady above $1,900, US PCE Price Index eyed for fresh impetus

• Gold price fails to attract any buyers or build on the overnight bounce from a multi-month low.
• Hawkish major central banks continue to act as a headwind for the non-yielding commodity.
• The US Dollar stands tall near a two-week high and also contributes to capping the XAU/USD.
• Investors keenly await the release of the US PCE Price Index before placing directional bets.

Gold price struggles to capitalize on the overnight bounce from the $1,893-$1,892 area, or its lowest level since mid-March and oscillates in a narrow trading band during the Asian session on Friday. The XAU/USD currently trades below the $1,910 level, nearly unchanged for the day as traders keenly await the release of the key inflation data from the United States (US) before placing fresh directional bets.

Market focus remains glued to US PCE Price Index

The US Personal Consumption Expenditures (PCE) Price Index, especially the core reading, is the Federal Reserve's (Fed) preferred inflation gauge and might influence expectations about the future rate-hike path. This, in turn, will play a key role in influencing the US Dollar (USD) price dynamics and help determine the next leg of a directional move for the Gold price. In the meantime, the USD is seen consolidating its gains recorded over the past two trading days, to the highest level since June 13, and lends some support to the US Dollar-denominated XAU/USD.

Hawkish central banks continue to cap Gold price

That said, a more hawkish outlook by major central banks continues to act as a headwind for the non-yielding Gold price and keeps a lid on any meaningful recovery. In fact, the European Central Bank (ECB) President Christine Lagarde, speaking at the Sintra central banking event in Portugal, said that inflation in the Eurozone is too high and is set to remain so for too long, lifting bets for a ninth consecutive lift-off in July. Adding to this, the Bank of England (BoE) Governor Andrew Bailey hinted that rates could remain at peak levels for longer than traders currently expect.

Elevated US bond yields underpin the USD and cap XAU/USD

Fed Chair Jerome Powell, meanwhile, reiterated that two rate increases are likely this year and said that he does not see inflation coming down to the Fed's 2% target until 2025. This, along with the upbeat US macro data released on Thursday, reaffirmed expectations for a 25 basis points (bps) rate hike at the next Federal Open Market Committee (FOMC) policy meeting on July 25-26. This, in turn, remains supportive of elevated US Treasury bond yields and favours the USD bulls, suggesting that the path of least resistance for Gold price is to the downside.

Gold price technical outlook

From a technical perspective, the $1,900 round figure, followed by the overnight swing low, around the $1,893-$1,892 region, now seems to act as immediate support levels. Some follow-through selling will reaffirm the negative outlook and make the Gold price vulnerable to extend the downward trajectory towards challenging the very important 200-day Simple Moving Average (SMA), currently pegged around the $1,840 region.

On the flip side, any positive move beyond the $1,913 area, or the overnight swing high, might now confront resistance near the $1,924-$1,925 region ahead of the $1,936 area. This is closely followed by the 100-day SMA, around the $1,942 zone. A sustained strength above might trigger a short-covering rally towards the $1,962-$1,964 hurdle en route to the $1,970-$1,972 supply zone. Some follow-through buying should allow Gold price to reclaim the $2,000 psychological mark and climb further towards the $2,010-$2,012 hurdle.

Key levels to watch