Gold prices are recovering from two-week lows as investors await key inflation data. The core PCE index, which will be announced this week, significantly affects the attractiveness of gold. Persistent high interest rates and strong US data are impacting market sentiment, putting pressure on the shiny metal.
Inflation report is in the focus of the gold market!
Gold prices showed a modest recovery on Monday. Thus, the yellow metal rebounded from the two-week low reached in the previous session. Investors are cautiously evaluating the decreasing possibility of the US cutting interest rates ahead of the critical inflation report to be released on Friday this week.
The core personal consumption expenditures price index (PCE), which will be announced on Friday, attracted the attention of the market. This index is the US Federal Reserve’s preferred measure of inflation. Therefore, its results have the potential to significantly impact gold prices. Historically, gold has served as a hedge against inflation. However, when interest rates rise, the attractiveness of gold, which has no return, decreases as it increases the opportunity cost of holding the metal.
Fed’s outlook and market reactions
Minutes of the Federal Reserve’s last meeting showed that it may take longer than expected for the central bank to reach its 2% inflation target. This has dampened the market’s expectations for a rate cut, according to the CME FedWatch tool. Additionally, investors predict only a 62% chance of a rate cut by November 2024.
Technical analysis and market sentiment
Technical indicators suggest gold will fall towards a range of $2,313.07 to $2,277.34. However, it then reflects that this will potentially trigger a technical bounce. However, if US economic data continues to outperform expectations, the decline in gold prices may be prolonged. cryptokoin.comAs you can see from , the upward trend has decreased recently. During this period, some investors liquidated their positions or entered a downward trend. The Fed’s insistent stance on maintaining higher interest rates for a long time was effective in this change.
Gold price forecast: Bearish outlook
Market analyst James Hyerczyk evaluates the technical picture for gold. Given current market conditions and the Fed’s stance, the outlook for gold remains bearish in the short term. The potential for further rate hikes and strong US economic data will likely continue to pressure gold prices downwards. Upcoming inflation data will trigger further volatility in the market. Therefore, it would be beneficial for investors to continue to be cautious.
Despite today’s technical bounce, gold prices are approaching the critical 50-day moving average at $2,313.35, which is key to the intermediate trend. Investors often buy on dips. Therefore, another bounce is possible on the first test of this moving average. If this level fails, selling pressure is likely to push prices lower to the short-term support at $2,277.34.
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