Gold pulls back toward $3,400 as focus shifts to US PCE inflation data

• Gold edges lower on Friday, retreating from its highest level since July 23 at $3,423 set the previous day.
• A steadier US Dollar and firm Treasury yields weigh on the precious metal.
• Investors are awaiting the July US core PCE Price Index, which is expected to rise 0.3% on the month and 2.9% on an annual basis.

Gold (XAU/USD) edges lower on Friday, pulling back from its highest level since July 23, marked the previous day. The precious metal is under pressure from a steadier US Dollar (USD) and firmer Treasury yields as traders reposition ahead of the Federal Reserve's (Fed) preferred inflation gauge, the core Personal Consumption Expenditures (PCE) Price Index, due later in the day at 12:30 GMT.

At the time of writing, XAU/USD is trading near $3,407 in the European session, down around 0.30% on the day. While month-end profit booking is also weighing on sentiment, the metal remains on track to secure solid monthly gains.

The US Bureau of Economic Analysis will release the July core PCE Price Index. On a monthly basis, core PCE is expected to rise 0.3%, matching June's pace, while the annual rate is projected to tick higher to 2.9% from 2.8% previously. A softer reading could reinforce expectations for a September Fed rate cut. In contrast, a stronger print may reduce dovish bets, strengthen the Greenback and pressure the precious metal.

Beyond the data, Gold's broader appeal remains intact. Concerns over the Fed's independence have bolstered its status as a safe-haven asset. At the same time, ongoing expectations for a Fed rate cut, a broadly weaker US Dollar, and persistent geopolitical and economic uncertainty further underpin the uptrend. Against this backdrop, short-term corrections are likely to be absorbed quickly, reinforcing the bullion's broader bullish bias.

Market movers: Greenback holds ground, yields stabilize, markets eye US inflation data

• The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, is holding firm after a three-day decline. At the time of writing, the index trades near the 98.00 mark, struggling around the lower end of this month's narrow range.
• US Treasury yields are steady across the curve, with the benchmark 10-year halting a three-day slide and hovering near 4.22%, close to four-month lows. The 30-year yield is snapping a two-day losing streak, trading around 4.90%. Meanwhile, the 10-year TIPS yield is seen near 1.81%.
• Geopolitical tensions remain elevated as peace efforts falter. Following the meeting between Russian President Vladimir Putin and US President Donald Trump in Alaska, the White House said it believed Putin had agreed to meet with Ukrainian President Volodymyr Zelenskyy and that planning was "underway." However, German Chancellor Friedrich Merz told reporters on Thursday that it now seems clear no such meeting will take place, casting doubt on the prospects for a negotiated settlement. The remarks came just hours after a deadly Russian missile strike on Kyiv that killed at least 23 people and damaged European Union (EU) and British diplomatic offices, underscoring the fragile and deteriorating state of the conflict.
• Fed independence concerns deepened on Thursday as President Trump's attempt to dismiss Fed Governor Lisa Cook escalated into a legal showdown. Cook filed a lawsuit challenging the move as unlawful, citing the Federal Reserve Act, and sought a temporary restraining order to block her removal. A court hearing is scheduled for Friday, keeping the issue in sharp focus for markets.
• Fed Governor Christopher Waller reinforced expectations for policy easing on Thursday, stating that he supports a 25 basis point (bps) rate cut starting in September, with further reductions potentially totaling 125-150 bps over the next three to six months. Waller downplayed the case for a larger 50 bps move next month but added, "That view, of course, could change if the employment report for August points to a substantially weakening economy and inflation remains well contained."
• The US Bureau of Economic Analysis will also publish headline PCE inflation and personal sector data for July at 12:30 GMT. Headline PCE Prices are expected to rise 0.2% MoM after 0.3% in June, with the annual rate seen steady at 2.6%. Personal Income is forecast to increase 0.4% compared to 0.3% previously, while Personal Spending is projected at 0.5%, up from 0.3%. Together with core PCE, these figures will shape expectations for the Fed's monetary policy path.

Technical analysis: Gold consolidates above $3,400, PCE report eyed as next catalyst

Gold (XAU/USD) is consolidating just above the $3,400 mark after touching its highest level in more than a month on Thursday at $3,423. The $3,400 psychological handle now serves as immediate support, with the next downside cushion seen at the 21-period Exponential Moving Average (EMA) near $3,395, followed by the 100-period EMA at $3,365.

The Relative Strength Index (RSI) is easing from overbought territory after Thursday's rally, currently sitting around 61. This indicates momentum is cooling but remains in bullish territory, suggesting scope for buyers to step back in if dips hold above the $3,400 mark.

On the upside, Thursday's high at $3,423 marks initial resistance. A sustained break above this barrier could extend the advance toward the $3,450 psychological region. Conversely, a move below $3,400 would risk exposing the $3,380-$3,370 area, where stronger technical support is layered.

With the US core PCE report as the next catalyst, short-term direction will likely hinge on whether Gold can defend the $3,400 base or push decisively beyond $3,423 resistance.