Gold News: PCE Data Looms; Can XAU Sustain Its Recent Uptrend?

Gold Eases Ahead of PCE Data as Traders Eye U.S. Rate Path

Gold prices softened on Thursday, reflecting cautious market sentiment ahead of the U.S. Personal Consumption Expenditures (PCE) price index release. With markets sitting near all-time highs, traders appear hesitant to take fresh long positions until inflation data solidifies expectations about the Federal Reserve’s rate decisions. The PCE reading, due at 12:30 GMT, is crucial as it is expected to guide the Fed’s stance on potential rate cuts.

Analysts widely anticipate the core PCE inflation rate to fall to 2.6% year-over-year in September, down from 2.7% in August, while the headline rate is forecasted to reach 2.1% year-over-year. A lower-than-expected print would reinforce the current disinflationary trend, supporting forecasts for multiple rate cuts through 2024 and 2025.

Traders currently see a 96% chance of a quarter-point rate cut next week, and CME FedWatch data suggests a 70% likelihood of another in December. However, any surprise to the upside in the PCE reading could prompt a reassessment of these expectations.

Geopolitical Tensions and Election Concerns Drive Safe-Haven Appeal

Gold remains in high demand as safe-haven buying persists due to uncertainties surrounding the upcoming U.S. presidential election. Recent polling shows a tight race between Republican Donald Trump and Democrat Kamala Harris, leaving investors on edge. StoneX analyst Rhona O’Connell pointed out that both gold and the U.S. dollar are attracting safe-haven flows, a common occurrence during periods of heightened political risk.

While gold eased slightly on Thursday, prices have been rallying through October, heading for their best month in seven as election anxieties fuel demand. Traders have adopted a “buy-on-dips” strategy, seeing any near-term declines as opportunities to strengthen positions.

Key Price Levels and Market Sentiment

With prices nearing the $2,800 psychological resistance, focus has shifted to downside risk management. Key support levels include a minor pivot at $2,750, with a break below that potentially setting up a trend reversal if prices fall to $2,708.76 or lower. Should PCE data come in hotter than anticipated, indicating resilient inflation, the dollar might gain, potentially adding downside pressure on gold.

Conversely, if the data matches or underperforms expectations, it could catalyze a rally in gold, driven by confidence in ongoing Fed rate cuts. Lower interest rates enhance the appeal of non-yielding bullion, providing an attractive hedge in an inflation-prone environment.

PCE Results to Set Short-Term Course for Gold Prices

Gold’s short-term outlook remains closely tied to the PCE release and its implications for Fed policy. Should the core PCE align with or dip below forecasts, gold may find support as the market embraces the Fed’s potential easing bias. In such a scenario, prices could challenge the $2,800 level and potentially set new highs, bolstered by expectations of monetary accommodation.

However, if core PCE data reveals stronger-than-expected inflationary pressure, markets could quickly reprice the odds of future rate cuts, reinforcing the dollar and weighing on gold. In this case, gold could face renewed selling pressure, with prices potentially retracing to the $2,750 mark or lower.

Market Forecast: Neutral to Bullish
Given the high stakes surrounding the PCE report, gold’s near-term trajectory is uncertain but leans bullish if inflation shows signs of easing. However, stronger-than-expected inflation data could challenge this stance, with implications for both the dollar and gold’s upside potential.