Upcoming U.S. PCE Data: What to Expect

On Friday,Regular domestic foreign exchange platform financial markets are focused on the upcoming U.S. August Core Personal Consumption Expenditures (PCE) index. This Fed-favored inflation measure is expected to provide significant economic signals that could influence the dollar's direction and lead to volatility in gold prices.

General Expectations for August PCE Data

Economists currently anticipate an overall PCE annual rate of 2.3%for August, a decrease from2.5%in July. The month-over-month increase is expected to be0.1%, slightly down from July's 0.2%. 

The most anticipated data point will be the core PCE, excluding food and energy. It is projected to rise from 2.6% in July to2.7%, with a monthly growth rate of about 0.2%.

Analysts warn that if the core PCE increase hits 0.3% or more, it could trigger a short-term rebound in the dollar, exerting downward pressure on gold prices.

Market Sentiment and Impact of Data

CME Group's FedWatch tool shows a drop in the likelihood of a 50 basis point rate cut in November, currently at 50%, down from around 62%. As expectations for significant rate cuts fade, the dollar seems poised for a resurgence, dampening gold's record rally. However, dovish remarks from Fed Governor Cook and China's recent stimulus measures continue to limit gold's downside.

The upcoming inflation indicator will likely dictate gold's next move and expectations for a major Fed rate cut in November. Higher-than-expected core PCE inflation could lower the likelihood of such a cut, boosting the dollar against major currencies and leading to a sharp correction in gold prices. Conversely, a surprise drop in core PCE could enhance the chances of another significant cut, sacrificing the dollar to push gold to new highs.

However, reactions to the PCE report might be temporary, as month-end and quarter-end fund flows could stir the market. Traders may also look to take profits on gold ahead of significant U.S. non-farm payroll data next week.

Considerations

Heavy economic data releases often prompt quick and intense reactions in financial markets. If the actual numbers deviate significantly from expectations, it could lead to major market volatility. Therefore, traders and investors should pay extra attention to risk management around data releases to avoid unexpected losses.

Gold Market Analysis

Fundamentals: Gold has surged over 29% this year, hitting multiple historical highs. Key drivers include:

- Rate Cut Expectations: The Fed’s easing policy has made gold a safe haven, attracting more investment.

- Safe Haven Demand: Increasing global economic uncertainty, especially geopolitical tensions, has heightened demand for safe assets like gold.

- Central Bank Purchases: Strong buying from global central banks for diversifying reserves has been a significant support for gold prices.

Despite current economic pressures, long-term outlooks remain positive, with many analysts expecting continued upward momentum for gold, particularly with forthcoming shifts in monetary policy.

Technical Analysis: Gold recently hit a high of $2,685 per ounce and is trading near $2,670. Technical indicators suggest a favorable short-term outlook, though overbought conditions present risks for a downward correction. Key support is at $2,650, with resistance at $2,700 and $2,750. A successful breakout above $2,685 could lead to targets of $2,750 and $2,800. However, if profit-taking occurs, initial support is at $2,650, with potential further drops to the September 18 high of $2,600.

In terms of technical indicators, the Relative Strength Index (RSI) is in the overbought zone, but momentum shows upward strength, indicating that despite short-term correction risks, the long-term trend remains positive.

Gold price short-term support and resistance level reference:

Support: $2662; $2650; $2638

Resistance: $2685; $2700; $ 2715

(This content is for sharing market news and commentary and does not constitute investment advice.)

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