In recent market developments, gold prices have experienced a notable recovery, surpassing the $1,910 mark after the release of the US Core Personal Consumption Expenditure (PCE) Price Index. This surge was primarily driven by a weakening US dollar, which dropped 0.4% and retreated from its two-week highs. The XAU/USD currency pair reached its highest level in three days, signifying a positive shift in sentiment for gold traders.
Positive Impact of US Core PCE Data:
The decline in the US dollar was triggered by the consumption inflation figures, which revealed a slight decrease higher than expectations. Consequently, US yields retreated, while equity and commodity prices experienced an upward boost. The US Core PCE declined in May, with the annual basis dropping from 4.7% to 4.6%. Furthermore, the headline figure dropped from 4.6% to 3.8%. These figures softened the expectations of a potential rate hike by the Federal Reserve in the upcoming meeting.
Key Focus on US Labor Market Data:
With the immediate impact of the US Core PCE data, market attention now turns towards next week’s US labor market data, which includes crucial reports such as the ADP, Jobless Claims (Thursday), and the Nonfarm Payrolls report (Friday). These reports will shed further light on the strength of the US economy and potentially impact gold prices.
Currently, the XAU/USD currency pair is trading around $1,915, showing a modest increase of less than $10. However, this gain marks one of the best days for gold prices in recent weeks. It is noteworthy that this recovery follows a low point of $1,892, which was reached on Thursday and represented the lowest level in three months.
From a technical perspective, XAU/USD has broken a short-term downtrend line, indicating a positive shift in the market sentiment. The next significant resistance area for the currency pair is projected at $1,920. Conversely, a decline below $1,905 could weaken the short-term outlook for gold.
Commerzbank’s Gold Price Forecast:
Commerzbank economists have expressed their outlook on XAU/USD, noting that the gold price has retreated $150 from its early-May high and is currently trading at a new three-month low of around $1,900. This decline has coincided with increasing outflows from gold exchange-traded funds (ETFs) since the end of May.
The prospect of higher US interest rates and a potential delay in the Federal Reserve’s policy reversal have dampened investor interest in gold as a non-interest-bearing investment. Consequently, Commerzbank suggests that gold may experience further dips below the $1,900 mark in the short term.
However, Commerzbank also highlights that a potential turnaround in interest rate policy could lead to a recovery in gold prices. Once indications of a change in the Federal Reserve’s stance become apparent, gold is expected to regain ground.