Gold price bulls are aiming for $2,000 per ounce. If PCE slows. US PCE inflation figures on Friday will have a significant market impact.
Gold prices sensitivity to PCE data
Even in a week with less volatility in the financial markets, the price of gold (XAU/USD) is still trading within a strong rise. On Friday, as the market prepares for the most important release of data of the week—The Personal Consumption Expenditures figures for the US, at 12:30 GMT. Conditions may pick up again.
Data on US PCE inflation is important for gold buyers.
The preferred inflation indicator of the Fed is US PCE data. And the markets are going to scrutinize the figures to determine the likelihood of another Fed rate hike at the next FOMC meeting.
The market expects the core PCE measure to increase by 4.7% annually and the monthly shift to decrease by 0.4%. Any pertinent deviation from these numbers will undoubtedly affect the structure of the financial market.
This shift is vital for investors in gold as the price of the precious metal moves counter to interest rates. Which are closely linked to the yields on US Treasury bonds and the value of the US dollar. As metals of value are priced in US Dollars and have no yield. Their worth declines if yields and the Greenback are greater.
US Treasury notes, the US dollar, and inflation factors all affect gold prices
Since gold is a non-yielding commodity that does not generate regular income, its correlation with US Treasury bond yields is typically negative. For the majority of 2022, the benchmark US 10-year bond yield increased steadily in reaction to the Fed hiking interest rates to combat rising inflation.
Early in 2023, there are still significant price pressures, but the CPI readings in the US and other major economies have begun to slow down. Analysts expect this pattern of disinflation to persist throughout the rest of the year. If this pattern continues, gold’s price should be able to receive some support from the demand side.
Lower-than-expected PCE inflation, gold prices could reach $2,000
Gold is reaching relative highs and lows across some periods as it trades in a strong upswing. Despite easing bank concerns and a light economic schedule this week. The XAU/USD price action noticed strong support at the 23.6% Fibonacci retracement level from March 8-17. Following that, gold bulls gradually restored the upward trend in anticipation of significant US PCE inflation figures.
Technical Outlook
The $2,000 round and psychological level, which has proven to be a difficult level to breach already three times in the last 10 days. It serves as the immediate resistance target for gold bulls. That might be achieved if the US PCE distribution is less than anticipated. The relative Strength Index (RSI) is still below the overbought area, which supports the possibility of a rally. (always data sensitive)
On the contrary, an optimistic metal correction could be caused by a higher-than-anticipated Fed-preferred inflation measure, and instant support would return to the previously mentioned 23.6% Fibonacci retracement, at $1,951.
