Gold Market Analysis: Key Factors Driving Price Movements
Gold Reacts to US PCE Inflation Data
- Gold rebounds after US PCE data release: Gold prices surged towards the end of the week as the US PCE inflation data came out lower than expected. This suggests a continuation of the Fed’s monetary easing stance, which is a positive factor for Gold.
- Less dovish interest rate prospects: Gold price retreated due to less dovish interest rate prospects and a stronger US Dollar, which are bearish factors for the precious metal.
Gold (XAU/USD) saw a recovery, reaching $2,660 per troy ounce on Friday following the release of the US PCE inflation data that failed to meet expectations. The disinflationary trend indicates that the Federal Reserve (Fed) will likely continue cutting interest rates at a steady pace, which is favorable for Gold as a non-interest paying asset.
The US Core Personal Consumption Expenditures (PCE) data for August showed a 0.1% rise on a monthly basis, falling short of expectations. On an annualized basis, Core PCE rose by 2.7%, slightly above estimates.
Market Sentiment and Global Developments
Gold’s price movement was influenced by various global factors, including:
- The Chinese government stimulus impact waning.
- Central banks adopting a less dovish stance globally.
- Expectations of a less aggressive monetary policy by the Fed due to positive US macroeconomic data.
Gold’s Technical Analysis and Price Levels
Gold hit a new all-time high of $2,685 on Thursday but pulled back slightly afterwards. Despite this, the metal remains in an overall uptrend across short, medium, and long-term periods.
XAU/USD Daily Chart Analysis
Gold is currently overbought according to the Relative Strength Index (RSI) indicator, suggesting a potential pullback. However, the uptrend remains intact, with key resistance levels at $2,700 and $2,750 if Gold continues to climb.
If a correction occurs, support levels are at $2,600, $2,550, and $2,544. Traders are advised to monitor RSI for potential exit points or reversal signals.
Economic Indicator Impact: Core PCE Price Index
The Core Personal Consumption Expenditures (PCE) data is a crucial economic indicator that measures changes in consumer prices in the US. It is the Fed’s preferred gauge of inflation and impacts market sentiment based on its monthly figures.
High readings are bullish for the US Dollar (USD), while low readings are bearish. Understanding this indicator can provide insights into the broader economic landscape and potential market movements.