Gold Forecast: XAU/USD recoups part of its latest losses, remains above $2,350

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Gold prices rise on Monday, with XAU/USD trading around $2,355 after the European session close. The shiny metal extended its recovery from Friday when it fell to $2,325.30, its lowest level in two weeks. The tepid recovery was the result of the persistent weakness of the US Dollar, as investors continue to discount that there will be no rate cuts from the Federal Reserve (Fed) in the next two meetings. The recovery stalled amid the Memorial Day holiday in the United States (US), keeping local markets closed.

The US has a light macroeconomic calendar in the coming days, focusing attention on Friday when the country will release the Personal Consumption Expenditures (PCE) Index for April, the Fed’s favorite inflation indicator. PCE inflation is expected to remain stable at 2.7% year-on-year, while the core annual reading is expected to be 2.8%, matching March’s reading. Finally, PCE is expected to have increased by 0.3% monthly. Generally speaking, readings below forecasts should increase the odds of an early rate hike, while the opposite scenario will be understood as a delay in monetary tightening beyond September.

XAU/USD short-term technical outlook

From a technical point of view, the XAU/USD pair seems poised to extend its advance. The daily chart shows that last week’s drop was enough for the pair to correct overbought conditions, and technical indicators are currently bouncing from their midlines. At the same time, the pair is recovering above a flat 20-day SMA, while the longer moving averages accelerate their advances well below the shorter one, reflecting persistent buying interest.

In the short term, however, according to the 4-hour chart, the recovery stalled around a congestion of moving averages, with the 20-day SMA heading firmly south and hovering around the flat longer ones. Finally, technical indicators are advancing, although within negative levels, without yet supporting a continuous advance.