Price of Gold Fundamental Daily Forecast – Could Spike Higher if PCE Price Index Misses Badly

Gold futures are trading higher on Friday, but the market has given back more than half of its earlier gains as we approach the regular session opening. Despite the early strength, most of the major players are on the sidelines ahead of this weekend’s meeting between U.S. President Trump and Chinese President Xi Jinping at the G-20 summit in Osaka, Japan.

At 10:24 GMT, August Comex gold is trading $1416.80, up $4.80 or +0.34%.

Helping to underpin gold today is a weaker U.S. Dollar. The greenback is down across the board against most major currencies. Most of the price action is likely being fueled by position-squaring ahead of the summit meeting. However, there is also economic news driving the price action.

According to the European Union’s Eurostat agency, Euro Zone inflation remained stable in June, a month after a sharp drop had raised fears of an economic slowdown in Europe.

Inflation in June was unchanged from May at 1.2%. This was in line with trader estimates. Nonetheless, the number was still well below the ECB’s target rate of just below 2%. Furthermore, it probably means the European Central Bank (ECB) will have to provide fresh stimulus later this year.

Daily Forecast

Volume is light, but we could still see some volatility as investors adjust positions ahead of the weekend’s events. Furthermore, investors will also be looking ahead to next week’s U.S. Non-Farm Payrolls report which could have an impact on the Fed’s interest rate decision in late July.

Traders will also have a mountain of data to shift through today, starting at 12:30 GMT with the release of the Core PCE Price Index and reports on Personal Spending and Personal Income.

At 13:45 GMT, traders will get the opportunity to react to the Chicago PMI. At 14:00 GMT, the University of Michigan will release data on consumer sentiment.

The Core PCE Price Index is expected to come in at 0.2%. Lower than expected inflation data will likely encourage the Fed to cut rates. This could weaken the U.S. Dollar and drive up demand for dollar-denominated gold.

We could see aggressive profit-taking in gold if inflation rises more than expected.

Earlier in the week, Fed officials made comments that encouraged traders to dial back their expectations of a 50 basis point rate cut. This drove gold prices lower. Gold could resume its rally if a lower than expected PCE Price Index number puts a 50 basis point rate cut back in play.