The US PCE inflation data is in line with expectations, and gold retreats to the 2,500 mark

On Friday (August 30), gold prices fell by 0.9% on Friday, closing at $2503.03 an ounce. Friday's U.S. inflation data was in line with expectations, and the dollar and U.S. Treasury yields were boosted by the data. However, due to the possibility of the Federal Reserve cutting interest rates in September, gold still recorded a monthly increase.

(One-hour chart of gold prices)

Data on Friday showed that the U.S. personal consumption expenditures (PCE) price index rose 0.2% month-on-month in July, in line with expectations, and the increase in June was confirmed as 0.1%. The PCE price index rose 2.5% year-on-year in July, unchanged from the increase in June. Consumer spending rose 0.5% in July after rising 0.3% in June.

After the data came out, according to the CME FedWatch tool, traders slightly raised their bets for the Federal Reserve to cut interest rates by 25 basis points next month to 69%, and the probability of a 50 basis point cut fell to 31%. The steady performance of inflation data, to some extent, slightly boosted the recovery of the dollar and US bond yields, and the trading time was on the weekend, which also triggered an adjusted pullback in gold's profit-taking. Even so, gold still recorded a second consecutive monthly increase, and the price of gold continued to remain above the high of $2,500, which shows that gold bulls are still holding on.

foreign exchange trading platformChief operating officer Alex Ebkarian said the PCE data confirmed that inflation is no longer the Fed's main focus because they have shifted their focus to unemployment. The change in the unemployment rate will directly affect whether a rate cut in September takes place. Therefore, the non-farm payroll data to be released this Friday will be the data that the market will take very seriously. Before the data was released, although gold was still trading near historical highs, traders were clearly starting to become cautious and were less willing to chase further upside space for the time being. If the data is better than expected, it may lead investors to restrain the pricing of the Federal Reserve's aggressive easing policy and promote a strong rebound in the dollar, which will weigh on gold. On the other hand, the second consecutive weak non-farm payrolls data could open the door for another downtrend in U.S. Treasury yields and the dollar, which could push gold to another peak.

On a technical level, the Relative Strength Index (RSI) on the daily chart remains near 60, and gold prices continue to trade in the upper half of the upside channel since mid-February for the time being. However, the technical indicator MACD appears to be showing signs of a dead fork, and it is necessary to be vigilant against the risk of a high-adjusted pullback in gold. Short-term support for gold prices is located in the $2,500-2,490/oz area (psychological level, the midpoint of the upward channel). The next support is at $2,475/oz, which is where the 20-day simple moving average (SMA) is located. If the daily closing price of gold prices is below $2,475/oz, it may open the door to further decline towards $2,420/oz (50-day moving average). On the upside side, static resistance appears to have formed at $2,530/oz. Once the price of gold rises above this level and confirms it as support, it is possible to target the upper limit of the upside channel at $2,600/oz.