Gold price forecast: XAU/USD risks deeper drop amid PCE data expectations
Gold slipped 1.6% on Thursday
Gold price bullish run in 2025 is ending this week as the metal faces renewed selling pressure, driven by a stronger US dollar and anticipation surrounding key US inflation data. After maintaining an uptrend since the start of the year, gold has seen a 2.6% weekly decline, with price action suggesting further downside risk.
Gold slipped 1.6% on Thursday, breaking below the previous week’s low of $2,877, before extending losses during the Asian session on Friday with a 0.7% dip to trade near $2,865 in the European session. The decline marks a shift in sentiment as the daily RSI retreats from bullish territory to neutral levels, raising concerns about further downside momentum.
Gold price dynamics (Nov 2024 - Feb 2025). Source: TradingView.
The primary driver behind gold’s decline is the US dollar’s strength, supported by expectations that the Federal Reserve will maintain its hawkish stance. Elevated inflation levels continue to weigh on market sentiment, reinforcing bets that the Fed will keep rates higher for longer. This has triggered outflows from the non-yielding gold market, pressuring its price.
Gold price outlook: RSI signals further downside as U.S. dollar rally continues
Despite the recent price weakness, uncertainty surrounding former US President Donald Trump’s proposed tariffs and broader risk-off sentiment could provide some support for gold, given its traditional role as a safe-haven asset. However, for bullish momentum to return, gold would need to reclaim the $2,877 resistance level, which previously acted as support.
Additionally, some investors are repositioning ahead of the release of the Fed’s preferred inflation gauge, the Core PCE Price Index, expected to rise 0.3% in February, up from the previous 0.2%. Any upside surprise in this data could strengthen the dollar further and add to gold’s downside risk.
If the daily RSI dips into bearish territory, gold may face a deeper correction, potentially sliding toward multi-week lows near the 50-day EMA at the psychologically significant $2,800 level. This would mark a critical test for gold bulls, who will need to defend this support to prevent a steeper decline.
Gold fell 2% as inflation concerns from Trump’s tariff plans raised expectations of high interest rates. The drop found support at the 100 EMA and Fibonacci 0.786 level.
