The rebound in the US dollar index has pressured the price of gold at an important juncture, whether gold bulls have a chance

On Friday (May 17), spot gold fluctuated in a narrow range during the Asian session and is currently trading around $2379.00 per ounce. Gold prices fell on Thursday after receiving double resistance suppression near the 2400 mark and the upper Bollinger Line, as the U.S. dollar and U.S. Treasury yields rebounded, but signs of cooling U.S. inflation cemented hopes of the Federal Reserve cutting interest rates this year and kept gold prices near a one-month peak.

Spot gold fell 0.39% to $2376.49 an ounce on Thursday, having hit its highest level since April 19 at the start of trading 2397.19. Gold prices rose more than 1% on Wednesday. Meanwhile, U.S. gold for June delivery closed 0.4% lower at $2385.50 an ounce.

Daily chart of spot gold

Jim Wyckoff, senior analyst at Kitco Metals, said: "The gold market has seen some of the profit-taking pressure that short-term futures traders routinely operate following the recent rally, and today's strengthening of the dollar index has added to that pressure."

The dollar rallied from near its 100-day moving average on Thursday, closing 0.2 percent higher after hitting a multi-month low of 104.08 earlier in the session as data showed U.S. consumer prices rose less than expected in April.

A stronger dollar has made gold more expensive for holders of other currencies. Meanwhile, New York Fed President William Williams said the good news of cooling inflation was not enough to require the Federal Reserve to cut interest rates soon.

According to the CME's FedWatch tool, market participants see a roughly 66% chance that the Federal Reserve will cut interest rates in September.

However, the continued fighting in the Middle East continues to provide support for gold prices.

Forex Platform: There is relatively little economic data this trading day, and investors need to focus on the speeches of Federal Reserve officials and the relevant news of the geopolitical situation. The short-term gold price trend has increased, and it is recommended to pay attention to the breakthrough in the 2350-2400 area.

The U.S. labor market remains rather tight, but the broader economy is starting to lose steam

Initial jobless claims fell last week, reversing almost half the increase at the start of the month, suggesting that labour market conditions remain tight even as job growth is cooling.

There were signs that the economy slowed further at the start of the second quarter as the delayed effects of the Federal Reserve's sharp interest rate hike began to take a bigger toll. Single-family home starts fell again in April and future building permits hit an eight-month low. Other reports on Thursday showed an unexpected drop in factory output.

So far, April economic data, including non-farm payrolls and retail sales, have fallen short of economists' expectations. "The economy is losing momentum in the face of restrictive monetary policy," said Sal Guatieri, senior economist at Bank of Montreal Capital Markets. "But the jury is still out on how quickly inflation will subside to allow interest rate policy to ease somewhat."

Initial claims for state unemployment benefits fell by 10,000 to a seasonally adjusted 222,000 in the week ending May 11, the Labor Department said. Economists had forecast initial claims of 220,000 after the highest level in eight months. Unadjusted initial claims fell 13,325 to 196,725.

The jobless benefits report showed the number of renewals, which measure hiring, rose by 13,000 in the week to May 4, to a seasonally adjusted 1.794 million, still low by historical standards.

The Fed's path to meeting its 2 percent inflation target could be bumpy. A separate report from the Labor Department showed that import prices rose 0.9 percent month-on-month in April, the biggest increase since March 2022. The March reading was revised up to 0.6 percent, from a previous increase of 0.4 percent. Economists had expected import prices excluding tariffs to rise 0.3 percent in April.

Import prices rose 1.1 per cent year-on-year in April, the biggest increase since December 2022. The surge in import prices, driven by higher oil and other commodity prices, prompted economists at Goldman Sachs to raise their forecast for April by a basis point for the personal consumption expenditure (PCE) price index, a measure of inflation tracked by the Federal Reserve as it sets monetary policy.

Goldman Sachs now expects core PCE prices to rise 0.26% month-on-month in April and 0.3% in March. The bank forecasts that the core PCE price index will rise 2.77% year-on-year, which is basically the same as the increase in March when rounded up.

However, economists believe that the rise in import prices is temporary. They point out that food and oil prices have stabilized, the dollar has appreciated, and Chinese producer prices have declined. If you are interested, you can continue to pay attention to the relevant content of the gold trend.