Gold: Softer Inflation and Slower Growth Support Recovery | Investing.com

Market sentiment shifted toward a more dovish outlook following the latest U.S. economic releases, as both inflation and growth indicators came in weaker than expected.

The Core PCE Price Index, the Federal Reserve’s preferred inflation gauge, rose by just 0.1% MoM, below the market expectation of 0.2%, while the annual reading remained at 3.3%, slightly lower than the previous month. This suggests that underlying inflation pressures continue to moderate.

Meanwhile, Q2 GDP growth slowed to 1.5%, significantly below the consensus forecast of 2.1%. The weaker growth figure indicates that economic activity is losing momentum, reducing the urgency for the Fed to maintain a highly restrictive monetary policy stance.

On the labor market side, Initial Jobless Claims came in at 197K, lower than the expected 201K, signaling that employment conditions remain relatively resilient. However, the strength in labor data was not sufficient to offset the broader narrative of slowing inflation and weaker economic growth.

Overall, the combination of softer inflation and slower growth is likely to reinforce expectations that the Fed may become less aggressive in the coming months. This environment tends to weigh on the U.S. Dollar and Treasury yields while providing support for non-yielding assets such as .

On the daily chart, the U.S. Dollar Index experienced a notable pullback following the release of the latest economic data. Price is currently trading below the 50-day Simple Moving Average, indicating short-term bearish momentum.

However, from a broader perspective, DXY remains within a bullish market structure, with the overall higher-high and higher-low sequence still intact. The current decline can be viewed as a corrective move rather than a trend reversal.

The next key area of interest lies within the 0.50–0.618 Fibonacci retracement zone, which also aligns closely with the 200-day Simple Moving Average acting as dynamic support. As long as price remains above this support region, the broader bullish outlook remains valid, with a potential upside target toward 101.980.

On the daily chart, gold has successfully closed above the 20-day Simple Moving Average, suggesting that short-term bullish momentum is beginning to strengthen.

This technical improvement is supported by the latest fundamental developments, particularly the softer inflation data and weaker GDP growth, both of which have reduced support for a stronger U.S. Dollar.

The next upside objective is located around 4,185, which represents a key resistance area and coincides with the 50-day Simple Moving Average. A sustained move above the 20-day SMA could encourage buyers to challenge this resistance level in the near term.

On the 4-hour chart, the broader market structure remains bearish. However, price action has been consolidating within a well-defined range, reflecting a period of equilibrium between buyers and sellers.

In the short term, momentum has improved as price continues to trade above both the 20-period and 50-period Simple Moving Averages. This alignment supports the possibility of further upside movement within the current range.

As long as price remains above these moving averages, the market may continue advancing toward the 4,185 resistance zone, which also corresponds with the daily SMA 50. A successful breakout above this area would strengthen the bullish recovery scenario, while rejection could result in a continuation of the broader consolidation phase.

The latest U.S. economic data delivered a generally dovish message to financial markets. Core PCE inflation came in softer than expected, while GDP growth slowed considerably, indicating that inflation pressures and economic activity are both moderating. Although labor market conditions remain relatively healthy, the overall data package favors a less aggressive Federal Reserve outlook.

From a technical perspective, DXY remains in a broader bullish trend despite its current correction toward a key support area. Meanwhile, gold is showing signs of short-term recovery after reclaiming its 20-day moving average and maintaining bullish momentum on the 4-hour chart.

In the near term, continued weakness in the U.S. Dollar and Treasury yields could support further gains in gold toward the 4,185 resistance zone. However, this level remains a critical barrier, as it will likely determine whether the current rebound develops into a larger trend reversal or remains a temporary recovery within the broader bearish structure.

Disclaimer: This analysis is provided for educational and informational purposes only and should not be considered financial or investment advice. Trading and investing in financial markets involve risk, and past performance does not guarantee future results. Always conduct your own research and manage risk appropriately before making any trading decisions.