The yellow metal could see further gains in the coming weeks should the US economy signal more weakness

Gold prices extended the rally for the third day in a row on Friday. The precious metal derived solid support from dollar’s broad-based weakness triggered by a less hawkish tone by the Federal reserve this week. The central bank hinted at a slower pace of hiking rates down the road, with the pace of tightening depending on the incoming economic data.

By the way, fresh data showed on Thursday that US economic growth fell 0.9% in the second quarter versus the expected gain of 0.3%. The number is telling investors there is no compelling reason for the Fed to deliver another 0.75% rate hike in the coming months, so a less hawkish approach towards the tightening cycle would be bearish for the greenback. Against this backdrop, gold prices could see further gains in the coming weeks should the US economy signal more weakness, thus pressuring the dollar.  

The XAUUSD pair exceeded the descending 20-DMA earlier in the week to more than three-week highs just below the $1,770 zone that now represents the immediate bullish target, followed by the $1,800 psychological level last seen on July 5 when gold saw a steep decline amid the rallying dollar.

The yellow metal added more than 2% since Monday, finishing the second bullish week in a row. However, as the prices started July slightly above $1,800, gold is set to close the month in negative territory, shedding nearly 2.4%. A failure to regain the psychological level in the near term could trigger a retreat, especially as the dollar remains within a broader bullish trend that remains strong and intact despite the downside pressure persisting since mid-July.


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