Cooling inflation and the situation in the United States and Iran support gold prices, PCE is doomed this week

In early Asian trading on Monday (February 16), spot gold was trading around $5,010 an ounce, down about 0.55% on the day, as the previous day's rally attracted an influx of selling orders. Gold prices rebounded on the previous day, recovering some of Thursday's losses and rising nearly 2% after the US released a weaker-than-expected inflation report, which increased market speculation that the Federal Reserve may cut interest rates, helping gold prices to stand again at the $5,000 mark. Gold prices were testing the $5,000 support level on Monday due to selling pressure.

U.S. inflation data was lower than expected, reviving hopes of a June interest rate cut, and gold prices rose last Friday

Consumer price inflation fell to 2.4 per cent year-on-year in January, down from an expected 2.5 per cent and 2.7 per cent, according to the Bureau of Labor Statistics. While the data provided a positive signal for the economy, core consumer price inflation remained sticky at 2.5 per cent year-on-year, in line with market expectations but slightly below the previous 2.6 per cent.

Last Friday, the price of gold initially fell back after hitting the $5,000 mark, but buyer power immediately emerged, absorbing dips around $4,950, driving the price of gold to rebound to the intraday high.

However, the overall US economic data released this week showed a solid performance. The non-farm payrolls report in January was bright, with more than 130,000 new jobs added and the unemployment rate held at 4.4%, which eased the pressure on the labor market of the Federal Reserve.

The question ensues: Will the Federal Reserve cut interest rates? They typically seek more data to confirm the resumption of the deflationary process. Following a peak of 3% inflation in September 2025, the last three readings are 2.7% in November and December 2025, and 2.4% in January 2026. So the conditions are tentatively in place, but the current attitude of most Fed officials, led by Chairperson Jerome Powell, suggests they may hold their ground until Kevin Warsh takes over from Powell in May.

Money markets have raised expectations for a rate cut in June. According to Prime Market Terminal data, the probability of the Federal Reserve cutting rates by 25 basis points is 55%.

U.S. Treasury yields fell last week, boosting gold prices and waiting to open this week

Meanwhile, US Treasury yields continued to fall last week, providing support for gold prices to rise. The yield on the 10-year US Treasury bond hit a two-and-a-half-month low (4.05%) on Friday.

The US dollar index fluctuated narrowly around 96.90 in the Asian market on Monday, maintaining the previous volatile trend and expected to reduce the volatility of gold.

The US-Iran talks have made limited progress, but risk aversion remains supportive for gold prices

On Sunday, Ibrahim Rezai, spokesperson for the National Security and Foreign Policy Committee of Iran's parliament, said that the current negotiations did not discuss Iran's suspension or abandonment of uranium enrichment activities, nor did they involve the removal of Iranian nuclear materials from the country. These issues have been accepted by the United States.

Mr. Rezai stressed that the Geneva talks had nothing to do with missiles or regional issues. He believes that countries in the region should jointly discuss security issues in other forms to ensure peace and common interests. Mr. Rezai pointed out that the Iranian negotiating team has prepared a plan, "but we are not very optimistic about the outcome of the negotiations considering the track record of the United States". The situation between the United States and Iran continues to provide support for safe-haven gold, which is expected to limit the downward space for gold prices.

Market focus shifts to FOMC meeting notes, Fed officials' speeches and PCE data

Looking ahead to this week, the US economic calendar will be busy, with a focus on durable goods orders, housing data, a series of speeches by Federal Reserve officials and the release of FOMC meeting notes. In the second half of the week, traders will focus on initial jobless claims, a GDP revision for the fourth quarter of 2025, and the release of the Fed's favourite inflation measure, the core personal consumption expenditures price index. Societe Generale Research pointed out that a lower-than-expected PCE data could further strengthen market bets for interest rate cuts, which could provide a boost to gold prices.

Gold technology outlook: Gold prices test $5,000 support

The daily chart shows that gold remains above key technical levels, with a short-lived but bullish tone and bulls still above the 20-day exponential moving average. The 14-day relative strength index is above the mid-50 line, indicating that buyer momentum is continuing to build.

However, gold must effectively break through $5,100 to open up the upside. Once this resistance is overcome, the next target will be $5,200, followed by a historical peak near $5,600. Otherwise, if gold fails to hold the $5,000 mark, it may face pullback pressure.

In terms of downside support, the key support is located near the $4,926 level of the EMA on the 20th, and it will test the $4,900 mark after falling. If it continues to decline, the next support will look towards $4,800, and the final target is $4,692.35 at the 50-day EMA.

(Daily chart of spot gold, source: Internet)

At 8:31 Beijing time, spot gold was quoted at $5012.68 per ounce.