• XAU/USD continues to edge lower after failing to close above $1,900.
  • Rising US Treasury bond yields weigh on gold in the second half of the week.
  • US PCE inflation preview: Gold remains key asset to watch.

The XAU/USD pair reached its highest level since early January at $1,912 on Wednesday but ended up closing the day in the negative territory below $1,900 pressured by rising US Treasury bond yields. With the T-bond yields extending the rebound into the second straight day on Thursday, gold’s correction continued and XAU/USD was last seen losing 0.3% on the day at $1,890.

Focus shifts to US PCE inflation data

Earlier in the day, the US Bureau of Economic Analysis (BEA) reported that it left the annualized first-quarter real Gross Domestic Product (GDP) growth unchanged at 6.4% in its second estimate. This reading missed the market expectation of 6.5% but failed to trigger a noticeable market reaction.

Other data from the US showed that Durable Goods Orders declined by 1.3% in April, falling short of analysts’ estimate for an increase of 0.7%, and the weekly Initial Jobless Claims declined to its lowest level in more than a year at 406,000.

With market participants largely ignoring the mixed US data, the benchmark 10-year US T-bond yield, which gained 1.5% on Wednesday, preserved its bullish momentum and is currently rising 2.15% at 1.617%. Meanwhile, the US Dollar Index is staying relatively quiet above 90.00 during the American trading hours.

On Friday, the BEA will release the Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred gauge of inflation, data alongside the Personal Spending and Personal Income figures for April. Earlier in the month, the stronger-than-expected April CPI print caused XAU/USD to lose 1% on the day of the publication and a similar market reaction could be expected if the PCE inflation surpasses analysts’ estimates. On a yearly basis, the Core PCE Price Index is expected to rise to  2.9% from 1.8% in March.

Moreover, some profit-taking could be in the books on the last Friday of the month and cause gold’s correction to deepen ahead of the weekend.

On the other hand, a decisive break above $1,900 on a soft PCE inflation reading could attract buyers and help gold end the week on a firm footing.

Technical levels to watch for

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