Advertisement
Advertisement

Price of Gold Fundamental Daily Forecast – PCE Miss to Downside Would Be Bullish

By:
James Hyerczyk
Published: Jun 25, 2021, 12:26 UTC

The inflation data will offer the latest indication of how much pressure the Fed is under to move, leaving traders unwilling to sell the dollar.

Comex Gold

In this article:

Gold futures are edging higher on Friday shortly before the release of a key U.S. inflation report. The market is currently in a position to post its first weekly gain in four as a preliminary deal on U.S. infrastructure spending pressured the U.S. Dollar. Gains are likely being capped, however, by steady Treasury yields.

At 11:51 GMT, August Comex gold is trading $1784.60, up $7.90 or +0.44%.

Traders are hoping today’s inflation report provides some clarity to the outlook for U.S. interest rates. This outlook became a little muddled this week by mixed commentary from Federal Reserve officials. While the weaker dollar is helping, gold continues to struggle to regain investor confidence especially after last week’s U.S. Federal Reserve surprise announcement regarding the timeline for future rate hikes.

US Dollar Capped by Infrastructure Deal

The spending plan for the infrastructure deal pressured the dollar because it is likely to be financed with higher debt. A weaker dollar tends to drive up demand for dollar-denominated gold.

Mixed Signals from Fed

Two Fed officials warned on Thursday that inflation could rise more than policymakers’ expectation near-term, after Fed Chief Jerome Powell said it would not be the only determinant of interest rate decisions.

Daily Forecast

Inflation data on Friday will offer the latest indication of how much pressure the Fed is under to move, as will labor market figures due in a week’s time – leaving traders unwilling to sell the dollar too hard just in case it bounces again soon.

Economists polled by Reuters expect the core personal consumption expenditures index to post its fastest rise in nearly three decades, with year-on-year gains of 3.4%. The data is due at 12:30 GMT.

“…The consensus is already expecting quite a large increase in the May PCE inflation data – looking for 3.9% YoY headline and 3.4% YoY core,” said strategists at ING in a note to clients.

“The bar may therefore be high for a nasty surprise and one that might push the Fed into early tapering and tightening. Baring a surprise on the PCE inflation, we would say the dollar index continues to consolidate – perhaps drifting back towards the 91.50 area.”

Gold is likely to remain rangebound over the near-term if the dollar index continues to straddle 91.50. That seems to be the pivot price controlling the direction of the precious metal. A move through the recent top at 92.395 would likely drive gold price through $1761.20, while a collapse under 91.50 by the dollar index could trigger further short-covering in gold.

For a look at all of today’s economic events, check out our economic calendar.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

Did you find this article useful?

Advertisement