Gold retreats from three-month high to near $4,600 after US PCE data
- Gold price tumbles to around $4,610 in Thursday’s early Asian session.
- US core PCE inflation held steady at 3.3% YoY in July, as expected.
- Traders will closely monitor the Jackson Hole event later on Friday.
Gold price (XAU/USD) falls to near $4,610 during the early Asian session on Thursday. The precious metal retreats from a three-month high as US inflation data came largely in line with expectations, increasing expectations of a Federal Reserve (Fed) interest-rate hike next month.
Data released by the US Bureau of Economic Analysis (BEA) on Wednesday showed that the Personal Consumption Expenditures (PCE) Price Index inflation remained unchanged at 3.7% YoY in July. This figure came in hotter than the market expectation of 3.6%.
Meanwhile, the core PCE Price Index, which excludes volatile food and energy prices, held steady at 3.3%, in line with the market consensus. On a monthly basis, the PCE Price Index and the core PCE Price Index both rose by 0.2% in July.
“Gold’s price action up to today’s data was just some profit taking ... PCE data came in largely in line with expectations, so we’re consolidating within yesterday’s range at this point,” said Peter Grant, vice president and senior metals strategist at Zaner Metals.
Markets are now pricing in nearly a 38% chance of a 25 basis points (bps) Federal Reserve (Fed) rate hike in September, compared with 36% before the data, according to the CME FedWatch tool.
Traders brace for the upcoming speech by US Federal Reserve (Fed) Chair Kevin Warsh at the Jackson Hole Symposium on Friday for more clues on the outlook for interest rates. Any hawkish remarks from Fed officials could weigh on the yellow metal in the near term.
US long bond squeeze fails to trigger capitulation in gold
Analysts at Rabobank highlight that, “as Bloomberg puts it today, ‘Short Squeeze in US Long Bonds Shows ‘Bessent Put’ at Work.’” They add that, despite the pronounced rally in US long-dated Treasuries, “Gold is not showing signs of capitulation, however,” underscoring the resilience of the precious metal even as bond markets respond to shifting sentiment.
Technical Analysis: Gold
In the daily chart, XAU/USD holds a bullish near-term bias as price remains above the 100-day simple moving average (SMA) and the 20-day Bollinger middle band, keeping the broader uptrend supported. The latest Bollinger configuration shows price pressing the upper half of the envelope, while the Relative Strength Index (14) at 67.64 hovers just shy of overbought territory, suggesting strong but increasingly stretched upside momentum.
On the topside, immediate resistance is aligned with the 20-day Bollinger upper band at $4,745, where corrective selling could emerge if bulls hesitate to extend the rally. On the downside, initial support is seen near the rising 100-day SMA at $4,380, followed closely by the Bollinger middle band at $4,365, which together form a dense demand zone guarding the recent advance; a deeper pullback would expose the lower Bollinger band at $3,985.14 as a more distant but notable structural floor.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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