Gold Is Bouncing From Monday’s Low Ahead of PCE
Spot Gold (XAUUSD) is higher Wednesday morning. The buying is coming straight off the rate trade. Treasury yields are easing from Tuesday’s highs with the dollar slipping off its latest top. October hike odds took a hit too. That was enough to lift gold off Monday’s low.
It isn’t enough to fix the chart. Gold is still trading under the support it lost Monday. The bearish structure hasn’t budged. The Personal Consumption Expenditures (PCE) report is the test this bounce has to pass.
At 11:39 GMT, Spot Gold is trading at $4,190.06, up $8.08 or +0.19%. It traded from $4,165.69 to $4,202.39.
Williams Cooled the October Hike and Gold Caught a Bid
New York Fed President John Williams handed gold its bid on Tuesday. Don’t mistake him for a dove. One more rate increase will probably be needed this year, in his view. He just doesn’t see any urgency heading into the October meeting. Policymakers have time to gather more information, according to Williams.
The October hike odds dropped to 45% on that.
Tariffs and the war with Iran have knocked the Fed off course in its progress toward 2% inflation, according to Governor Michael Barr. He expects further policy adjustments will likely be needed. That’s nothing like the tone Williams gave the market.
Gold is caught in the middle of that split. October looks softer. December still carries an 89% chance of a hike, so nobody is pricing the end of this cycle. What traders are fighting over is the timing of the next move. PCE is the first hard number to weigh in on it.
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See all Gold forecastsYields Gave Gold Room Without Breaking Their Uptrend
The two markets that drove Monday’s sell-off are giving a little back. The 10-Year U.S. Treasury yield topped out at 5.29% Tuesday. It’s sitting near 5.23% heading into PCE. The 30-Year yield eased too, after hitting its highest level since 2002.
That’s a breather for gold. I wouldn’t read it as anything more. The 10-Year is still well above its 5.04% breakout level and the 50-day moving average at 4.81%.
The U.S. Dollar Index ran to 101.61 earlier Wednesday before slipping back to 101.24. That’s still above the September high at 101.40. The 100.56 breakout is further down. Gold gets some room to work with off the pullback. The dollar trend hasn’t changed.
The August PCE Forecasts Don’t Hand the Fed a Win
There’s nothing in the August forecasts that lets the Fed call it done. Economists are looking for 0.3% gains in both the all-items PCE price index and core PCE. On an annual basis, that’s 3.7% headline with core at 3.3%.
The revisions complicate this one. The Bureau of Economic Analysis is revising the PCE series back to 2021. Wall Street expects the July annual rate could come down by two or three tenths. That cleans up last month. August still has to print on its own. The inflation problem going forward doesn’t get revised away.
Gold’s morning gain still reads like short-covering. Short-covering off a broken chart doesn’t last long without help. Core PCE decides whether it gets any.
Daily Spot Gold (XAUUSD) Technical Analysis
Spot Gold is trading higher Wednesday, however, the main trend remains down according to the daily swing chart. A trade through the lower top at $4,399.67 will change the main trend to up. Monday’s low at $4,110.87 is the immediate downside trigger. A trade through that price will signal a resumption of the downtrend.
The long-term retracement zone is $4,319.61 to $4,230.51. Gold broke through the lower boundary Monday, turning the zone into resistance. The 50-day moving average at $4,323.00 is also nearby.
The 200-day moving average at $4,539.29 is providing long-term resistance and trend direction. Gold is trading below both moving averages.
Wednesday’s high at $4,202.39 is only a high at this point. It does not establish a new top or change the swing-chart structure. The next major support is the August swing bottom at $3,996.06, followed by the main bottom at $3,942.10.
What to Watch
The PCE report hits with the October hike trade already pulled back and a December increase still heavily priced. Williams bought the market some time. Barr isn’t convinced the Fed can afford it. Non-Farm Payrolls follow on Friday, so whatever PCE starts, the jobs data gets to finish.
A softer core PCE number could extend the pullback in yields and give buyers a shot at $4,230.51. A firm reading would leave Wednesday’s rally looking like short-covering and put Monday’s low back in play.
The bias leans bearish with the main trend down on the daily swing chart. Buyers came in off Monday’s $4,110.87 low. Wednesday morning’s rally remains well short of the level gold broke through Monday. Sellers are still sitting there, untouched by the bounce. Buyers haven’t touched $4,230.51 yet.
