The US PCE inflation data is coming! Gold prices rose nearly $30 overnight. Do bears still have a chance?

Forex Platform- On Thursday (June 27), as weak economic data supported expectations that the Federal Reserve will start cutting interest rates this year, weighing on the dollar, spot gold rose sharply by nearly $30 after falling sharply in the previous session. On Friday, investors will usher in the heaviest economic data of the week - US PCE inflation data, which is expected to trigger market movements.

Spot gold ended Thursday up $29.26, or 1.27 percent, at $2327.30 an ounce.

FXStreet analyst Christian Borjon Valencia pointed out that on Thursday, after the release of US economic data, the dollar index was off its monthly high of 106.13, and gold prices rose more than 1%.

Weak U.S. economic data weighs on the dollar

Phillip Streerial, chief market strategist at Blue Line Futures, said that some of the data that has been released has supported the gold market. Basically, wholesale inventories are lower than expected, and the final GDP value has dropped significantly, which has pulled down the dollar index and thus boosted gold prices.

The dollar fell 0.2% against a basket of currencies, and the yield on the benchmark 10-year Treasury note fell to 4.2845%, making gold more attractive to non-dollar buyers.

Data showed that business spending on equipment fell in May, while falling exports pushed up the goods trade deficit, highlighting the weakening of economic momentum. The US government confirmed that growth in the final GDP figure slowed sharply in the first quarter.

Quarter 1 GDP growth in the US was revised up slightly to 1.4 per cent, but down from 3.4 per cent in the three months to the end of 2023. The GDP report also showed weakness in consumer spending. US consumption growth was revised down to 1.5 per cent from a previous forecast of 2 per cent.

Helen Given, a currency trader at Monex USA, said: "The market seems to be more focused on the decline in personal consumption, which would definitely constitute a sign of a slowdown in the US economy. GDP below its peak in the first quarter is to be expected, but the drop in consumption suggests a further slowdown is possible."

Thursday's data also showed initial jobless claims fell to 233,000 in the week ending June 22. However, in the week ending June 15, the number of continuing jobless claims added 18,000 to 1.839 million, the highest level since the end of 2021.

Analysts say the number of Americans renewing jobless claims last week rose to its highest level since late 2021, a warning sign that it is taking longer for the unemployed to find work and not a positive sign for the economy.

Another data showed that the index of second-hand housing contracts in the United States unexpectedly fell to a record low in May, as rising mortgage rates and high home prices deterred potential buyers.

National Real EstatebrokerThe NAR said on Thursday that its index of second-hand housing contracts fell 2.1 per cent to 70.8, the lowest level in 2001. Economists surveyed by Bloomberg had forecast a 0.5 per cent increase.

Meanwhile, new US manufacturing orders unexpectedly fell in May, signalling weaker business spending on equipment in the second quarter. Orders for core capital durable goods, excluding aircraft and military hardware, fell 0.6% month-on-month in May, the biggest drop so far this year. Economists polled by Reuters had forecast a modest increase of 0.1%.

US PCE inflation data hits

On Friday at 20:30 Beijing time, the US personal consumption expenditure (PCE) price data for May will be released, which may shed light on the Federal Reserve's interest rate path.

According to authoritative media surveys, the monthly rate of PCE price index in the United States is expected to be flat in May, after rising 0.3% in April. The annual rate of PCE price index in the United States is expected to increase by 2.6% in May, after an increase of 2.7% in April.

In terms of more crucial core data, the survey shows that the monthly rate of the core PCE price index in the United States is expected to increase by 0.1% in May, after an increase of 0.2% in April; the annual rate of the core PCE price index in the United States is expected to increase by 2.6% in May, after an increase of 2.8%.

The year-on-year change in the core PCE price index, the Federal Reserve's favorite inflation measure, has a big impact on policymakers.

Analysts pointed out that the upcoming US core PCE price index for May will serve as a short-term catalyst for market movements.

According to LSEG's "Fed Watch" data, investors are largely adamant that interest rates will be cut about twice this year, while the Fed is expected to cut rates only once.

Due to the fact that gold does not generate interest rates, a decrease in interest rates would reduce the opportunity cost of holding gold, making it more attractive to investors.

How should we proceed after the gold price skyrocketed?

Valencia pointed out that as the head and shoulders pattern remained intact, suggesting that gold prices could fall further. Although gold prices rose on Thursday, they have not yet challenged the neck line of the head and shoulders pattern. If they break decisively above the neck line, this could negate the pattern and pave the way for gold prices to test the June 21 high of $2,368/oz.

The Relative Strength Index (RSI) is below the midline of 50, indicating that the momentum is in favor of sellers.

Valencia said the next level of support for gold prices would be $2,300 an ounce. Once this level is effectively broken, gold prices are expected to fall to the May 3 low of $2,277 an ounce, followed by the March 21 high of $2,222 an ounce. If the above level is lost, the price of gold will fall further, and sellers will target the head and shoulder target of $2,170-2,160 an ounce.

Instead, if gold regains $2,350, it will look to higher key resistance levels, such as the June 7 cycle high of $2,387 an ounce, Valencia added. Once that resistance is overcome, gold prices will challenge $2,400 an ounce.

Beijing time 09:20, spot gold reported 2321.26 dollars/ounce. After the data was released, it had a certain impact on the price of gold, resulting in a sharp rise in the price of gold. If there is anything else you want to know, you can continue to pay attentionForex Platform。