Gold Price Forecast: XAU/USD battle with $2,530 continues ahead of US PCE inflation data
Gold price rebound falters as the focus shifts to US core PCE inflation data.
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Gold prices are again in the red early Friday, having encountered solid resistance near $2,530 on Thursday. Gold purchasers are cautious and desist from placing new wagers ahead of the US core Personal Consumption Expenditure (PCE) inflation showdown.
Gold prices look to US PCE inflation for a new direction.
The core PCE Price Index, the US Federal Reserve’s (Fed) preferred inflation indicator, is the most important economic data release this week, and it will help determine the Fed’s interest-rate drop possibilities after September.
This data will be keenly scrutinized, particularly after Thursday’s upward revision to the US second-quarter GDP statistics, which dampened market expectations of a significant rate decrease in September.
The US economy expanded at an annual rate of 3% last quarter, boosted by strong consumer spending and business investment, up from the government’s first estimate of 2.8%. According to the CME Group’s FedWatch Tool, markets now price in only 34% of a 50 basis point (bp) decrease next month, down from 38% a day earlier.
Following the US GDP revision, the US dollar returned strongly, mirroring the steady recovery in US Treasury bond yields throughout the curve. However, this did not dissuade gold buyers, who hit record highs at $2,532 yet again.
The gold price rose on heightened geopolitical tensions between Russia and Ukraine, following the Ukrainian military’s strike on oil and artillery facilities in the Rostov, Kirov, and Voronezh districts on Thursday. Simmering tensions between Israel and Iran keep the haven demand for gold alive and kicking.
Furthermore, falling inflation in Spain and Germany fueled anticipation that the European Central Bank (ECB) would decrease interest rates in September. Renewed expectations of a global low-interest-rate regime fueled the gold price increase.
However, the gold price stalled its recovery momentum early Friday, as traders continue to expect a strong US PCE inflation reading, which might cast doubt on the Fed’s plans to ease further later this year.
In July, the headline PCE Price Index is predicted to rise at a 2.6% annual rate, while the core PCE index is expected to rise by 2.7% year on year. The prior figures were 2.5% and 2.6%, respectively.
Aside from the US PCE inflation data, gold prices may be influenced by end-of-month flows and position adjustments ahead of next week’s Nonfarm Payrolls report.
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