Gold has maintained a strong position, hovering near an all-time high as of Friday. The anticipation of the release of US PCE data later in the day is keeping traders on edge, awaiting fresh signals for market direction. The precious metal is currently fueled by robust demand, stemming from its safe-haven status, significant purchases by central banks, geopolitical tensions, and growing expectations for the Federal Reserve’s first rate cut in September.
Having marked a remarkable 22% increase since the beginning of the year, gold is poised to secure another monthly gain, extending its impressive rally over the past six months. The recent triangular consolidation pattern below the new record high of $2531 indicates a bullish alignment. Dips have been consistently contained by the rising 10-day moving average, with a series of higher lows (monitored by the 10DMA) signaling persistent strong buying interest.
Key Drivers
The upcoming Federal Reserve policy decision is expected to be a major catalyst for gold’s movement in the near term. With the market fully pricing in a 25 basis points rate cut in September, there are increasing speculations that the central bank might opt for a more aggressive 50 basis points cut. The release of the US PCE Index, which is the Fed’s preferred inflation measure, will provide crucial insights into the size and pace of policy easing.
Forecasts suggest that the Core PCE Index, which is a refined indicator stripped of volatile elements, is likely to remain steady at 0.2% on a monthly basis, while the annualized figure could edge higher to 2.7% in July from 2.6% in June. These values indicate that inflation in the US is within the desired range, further reinforcing expectations of an imminent rate cut by the central bank.
Price Scenarios
In the event that the PCE data aligns with expectations, gold prices are expected to climb higher, potentially surpassing the current peak of $2531 and setting sights on targets at $2551 and $2574 (Fibonacci projections). Conversely, a surprise increase in inflation could deflate gold prices, leading to a breach of initial support levels at $2511/00 (10DMA/psychological level) and increasing the risk of a deeper decline towards critical support levels at $2475/70 (20DMA/August 22 trough) and $2432 (August 15 higher low extension).
As traders await the unfolding of key events, the gold market remains poised for significant volatility and potential price swings, influenced by a myriad of factors including economic data releases, geopolitical developments, and central bank policies.