Gold Prices Edge Higher Ahead of Key Inflation Data Release

27 Mayıs 2024

Today market analysis on behalf of Hani Abuagla Senior Market Analyst at XTB MENA

 

Gold futures rebounded following last week’s downturn. Market participants are anticipating the release of the Personal Consumption Expenditures (PCE) price index in the US, scheduled for Friday. The core PCE is expected to remain unchanged for the third consecutive month at 0.3% month-on-month.

However, core PCE has stabilised after spiking to 0.5% in January. Gold prices could see gains if data indicates an ongoing reduction in inflationary pressure below market expectations.

Conversely, should the core PCE price index surpass projections, gold could face pressure, limiting its upside in the near term. The PCE index is a key indicator for the Federal Reserve in assessing inflation, and its trend could be a determinant in the central bank’s interest rate decisions. The anticipation of the PCE data comes in the wake of recent Federal Reserve minutes that suggest a cautious approach to reaching the 2% inflation target. This has cast doubts on the likelihood of near-term rate cuts, thereby impacting gold prices.

However, gold prices could continue to find support in rising tensions in the Middle East as well as concerns about potential escalations between China and Taiwan. Regarding the demand side, gold is also benefiting from purchases from central banks, notably the PBoC.

 

Zaid Barem / YMM