Gold (XAU/USD) edged lower during early European trading hours on Friday, retreating from a five-week high near $3,425 reached in the prior session. The decline comes amid profit-taking and a firmer US Dollar (USD), supported by upbeat US economic data.
The latest US GDP report showed the economy expanded at an annualized pace of 3.3% in the second quarter, surpassing the 3.0% initial estimate and market consensus of 3.1%. Meanwhile, Initial Jobless Claims for the week ending August 23 fell to 229K, better than both the revised prior figure of 234K and expectations of 230K. These solid readings strengthened the greenback, weighing on the USD-denominated precious metal.
Despite the pullback, gold remains underpinned by growing expectations that the Federal Reserve (Fed) will begin cutting rates in September. Fed Governor Christopher Waller on Thursday signaled support for a rate cut next month and suggested further reductions may follow within the next three to six months to prevent deterioration in the labor market. Similarly, New York Fed President John Williams highlighted the likelihood of rate cuts ahead, though emphasized that upcoming data will guide policymakers’ decisions.
Market attention now turns to Friday’s release of the US Personal Consumption Expenditures (PCE) Price Index for July—the Fed’s preferred inflation gauge. Consensus forecasts point to a 2.6% year-over-year increase in headline PCE and 2.9% in the core measure. According to CME’s FedWatch tool, traders are pricing in nearly an 85% chance of a quarter-point cut next month.
Technical outlook
Despite Friday’s dip, gold’s broader bullish bias remains intact. The metal continues to trade above the 100-day Exponential Moving Average (EMA), with the 14-day Relative Strength Index (RSI) hovering above 60, indicating sustained positive momentum.
Immediate resistance is seen at $3,425, the upper boundary of the Bollinger Band. A break above this zone could open the path toward $3,439 (July 23 high) and the key psychological $3,500 level, last tested on April 22.
On the downside, initial support lies at $3,373 (August 27 low), followed by $3,351 (August 26 low). A deeper correction could expose the lower Bollinger Band at $3,310.
