Price of Gold Fundamental Daily Forecast – Strong Core PCE Price Index Could Sink Gold Prices

Gold is trading higher on Tuesday, but after consolidating for two sessions inside last Thursday’s relatively wide range, does the move represent the start of something big, or just computers creating a market ahead of today’s slew of U.S. economic data and Wednesday’s Fed monetary policy statement and widely expected interest rate cut?

At 09:56 GMT, December Comex gold is trading $1440.90, up $7.60 or +0.52%.

Perhaps providing some support early Tuesday is a pullback from its high by the U.S. Dollar and a slight downward bias in U.S. Treasury yields.

In keeping with the theme of lower interest rates, the Bank of Japan announced earlier in the session that it would be keeping its current ultra-low interest rate steady and leaving policy unchanged until spring 2020. However, it did add that it would ease “without hesitation” if the economy loses momentum for achieving the central bank’s 2% inflation target.

In the U.S. on Tuesday, gold traders will get the opportunity to react to a wide range of U.S. economic data including Core PCE Price Index, Personal Spending, Personal Income, S&P/CS Composite-20 HPI, Conference Board Consumer Confidence and Pending Home Sales.

Gold traders should pay close attention to the Core PCE Price Index report, due to be released at 12:30 GMT. This is because it’s the Fed’s favorite inflation indicator.

On July 16, Federal Reserve Chairman Jerome Powell said in a speech to the Bank of France in Paris, the central bank now estimates that a key measure of core inflation increased in June to its highest level in four months but added that, despite the acceleration, inflation pressures “remain muted.”

According to MarketWatch, “A 1.7% annual gain in core PCE would be the highest since February. Core PCE inflation last hit the Fed’s 2% annual target last July, the first time it had hit the target since 2012.”

Furthermore, “The June estimate is remarkable mainly because it comes in advance of the official government release of the June PCE data, which won’t be made public until July 30, the first day of the Fed’s next interest-rate-setting meeting.”

Daily Forecast

The release of the Core PCE Price Index could be a market-moving event on Tuesday. If the number hits the 2% target then the Fed will announce a 25-basis point rate cut on Wednesday, but likely indicate it would skip a cut in September to see if the upward trend continues. This could be potentially bearish for gold prices because some investors are betting on a series of rate cuts by the Fed.