Gold recovers as focus shifts to US consumer sentiment data
- Gold price recovers as yields soften on mixed commentary from Fed speakers.
- US consumer sentiment and inflation expectations take focus.
- XAU/USD traders regain confidence as price recovers above $3,350.
Gold (XAU/USD) is trading higher on Friday as investors remain focused on Fed expectations and look ahead to key US economic data. At the time of writing, XAU/USD recovers above $3,350, pushing the price closer toward the upper boundary of a symmetrical triangle pattern.
Traders are digesting fresh US housing data released on Friday, with Building Permits and Housing Starts for June providing further insight into the health of the real estate sector which improved significantly.
The preliminary reading of the University of Michigan (UoM) sentiment data and inflation expectations is scheduled for release at 14:00 GMT. This monthly report is based on how consumers perceive the current economic environment in the US and their potential expectations for the next 12 months. As it is considered to be a leading economic indicator, it often sets expectations, sentiment, and the potential outlook for the economy.
As the Federal Reserve (Fed) continues to hold interest rates within the current 4.25%-4.50% range, investors continue to search for fresh clues on when the Fed may reduce rates. According to the CME FedWatch Tool, markets are pricing in a 56.2% probability of a 25 basis point (bps) rate cut in September, with the likelihood of keeping rates unchanged at the same meeting at 41.2%.
Daily digest markets movers: Gold hinges on macro data and Fed rhetoric
- US Building Permits rose 1.39 million in June, beating estimates of 1.394 million and reflecting a 0.2% increase after falling 2% in May. Meanhwil Housing Starts also surprised to the upside, reporting a 1.321 million expansion, up from 1.263 million. A increase of 4.6% shows a very different picture from the 9.7% contraction last month.
- The preliminary UoM Consumer Sentiment Index is expected to tick up to 61.5 in July, compared to 60.7 recorded in the previous month. The report also provides information on the 1-year and 5-year consumer inflation expectations, which recorded 5% and 4%, respectively, in June.
- On Thursday, Fed Governor Adriana Kugler pushed back on expectations for near-term monetary policy easing, stating that there should be “no rate cut for some time” as “tariffs begin passing through to consumer prices.” Her comments reflected a hawkish stance centered on persistent inflation pressures.
- In contrast, San Francisco Fed President Mary Daly struck a more balanced tone, saying it’s “reasonable to expect two rate cuts by the end of 2025,” while warning that “overly restrictive policy could unduly hurt the labor market” if the Fed waits too long.
- Fed Governor Christopher Waller adopted a more dovish view, stating, “It makes sense to cut the FOMC’s policy rate by 25 basis points at the July meeting,” citing risks from slowing growth and labor market softness.
- The US Consumer Price Index (CPI) on Wednesday reflected that inflation is showing signs of rising, reinforcing the view that the Fed may delay rate cuts beyond September, possibly pushing easing to October.
Gold Technical Analysis: XAU/USD regains confidence with prices above $3,350
Gold price action remains rangebound on Friday, trading just above $3,350 as it continues to coil within a symmetrical triangle formation. The next level of resistance lies near $3,362, the downtrend resistance of the chart pattern.
The 23.6% Fibonacci retracement of the April low-high increase provides a firmer zone of resistance at $3,371.
A break above this level would expose $3,400, a key psychological and structural barrier, followed by the April peak near $3,452.
On the downside, the 50-day Simple Moving Average (SMA) at $3,324 provides initial support. With a firmer floor at the 38.2% Fibonacci level at $3,292.
A sustained move below this level would shift focus toward the 100-day SMA and the 50% Fibonacci level at $3,228.
A downside break of the triangle would suggest bearish pressure returning, with $3,200 as a likely target.
With the Relative Strength Index (RSI) hovering near neutral at 52, momentum remains balanced, underscoring indecision as traders await a directional catalyst.
Gold daily chart
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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