- Gold prices currently sit approximately $3,750 higher than the US Personal Consumption Expenditure (PCE) inflation data from August.
- The rate of US PCE inflation is anticipated to rise consistently at about 2.9% annually.
- The positive GDP figures from the US in Q2 provide contrasts to the Federal Reserve’s predictions.
On Friday during the European trading hours, gold prices (XAU/USD) are expected to hover around the $3,750 mark. The precious metal is likely to stabilize as investors anticipate the US Personal Consumption Expenditure (PCE) data, which is set to be released at 12:30 GMT for August.
Investors are carefully monitoring US inflation metrics for hints about how the Federal Reserve may adjust interest rates in the coming months, especially since officials indicated that the monetary policy trajectory could be leaning downwards.
Core PCE inflation, which the Fed prefers to use as a gauge, is estimated to have increased at a moderate pace of 0.2% monthly, compared to the prior estimate of 0.3%. The annualized figures are expected to rise steadily to 2.9%.
Expectations of dovish moves from the Fed were tempered on Thursday, following revisions to US quarterly GDP data indicating stronger economic growth than initially anticipated. The latest data revealed an economic growth rate of 3.8%, surpassing the flash estimate of 3.3%.
The likelihood of the Fed making a 50 basis point cut by year-end has decreased to 62% from 73.3% observed on Wednesday, according to the CME FedWatch tool.
In general, this isn’t enough to alleviate any dovish expectations from the Fed regarding non-yielding assets like gold.
Gold Technical Analysis
For Friday, gold prices are positioned near $3,750. The short-term trend for gold remains bullish, with the 20-day exponential moving average (EMA) around $3,644.80. A crucial support for gold prices is forming along an upward trend line, approximately at $3,321.50, which began on August 22.
The 14-day relative strength index (RSI) is fluctuating between 60.00 and 80.00, highlighting strong bullish momentum.
If prices exceed the September 23 high of $3,791, we could see gold prices climb to $3,900.
Gold Daily Chart
Gold FAQ
Gold has historically held significant value, often serving as a medium of exchange. Its appeal goes beyond just aesthetic beauty; it’s often seen as a safe haven asset—especially in turbulent times. Besides, it acts as a hedge against inflation and currency depreciation because it isn’t tied to any specific issuer or government.
Central banks are major holders of assets. During uncertain periods, they tend to buy gold to diversify their reserves and bolster the economy’s perceived strength. High reserves of gold instill trust in a country’s financial stability. In 2022, central banks added about 1,136 tonnes of gold to their reserves, worth approximately $70 billion, marking the most substantial annual purchase since records began. Countries like China, India, and Turkey are rapidly increasing their gold reserves.
Gold usually moves inversely with the US dollar and US Treasury securities, both considered safe haven assets. When the dollar weakens, gold prices generally rise, providing a diversification asset for investors and central banks during turbulent times. In contrast, gold often feels the impact of stock market rallies, which can drive its prices down.
Several factors can influence gold prices. Concerns regarding geopolitical instability or significant recessions can escalate gold values quickly due to its safe nature. As a non-yielding asset, gold tends to perform better with lower interest rates, while higher rates can put pressure on it. Most price movements also depend on the performance of the US dollar, since gold is priced in dollars (XAU/USD). Strong dollar values can suppress gold prices, whereas weaker dollar situations can drive prices higher.
