Gold Stumbled Amid Surge In US Treasury Yields, Rose Over 2% Monthly -

Gold Stumbled Amid Surge In US Treasury Yields, Rose Over 2% Monthly

Aug 31, 2024Jeremy ParkinsonFinance0

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Gold fell below the $2,500 mark following the US PCE report, which potentially boosted the likelihood of a September Fed rate cut.

The Fed’s cautious policy easing strategy seemed to stir uncertainty as the market favored a 25 bps cut.

Traders’ bets on a 25 bps rate cut rose to around 69% on Friday, while odds for a 50 bps reduction fell to 31%, per the CME FedWatch Tool.

Gold prices tumbled by over 0.90% on Friday. The yellow metal plummeted below the $2,500 figure for the second day in the week after a report from the US Department of Commerce revealed that inflation has continued to edge lower, according to July’s core Personal Consumption Expenditures Price Index (PCE).As of the time of writing, the XAU/USD cross was recently seen trading at around $2,497 after hitting a high of $2,526. Additionally, bullion prices seemed to be headed for a 2% gain in August after gold hit an all-time high of $2,531 on Aug. 20.Data from the US Bureau of Economic Analysis (BEA) showed that the Federal Reserve’s favorite inflation gauge, the core PCE, came in slightly below estimates, though it matched June’s report. The data supported the Fed’s intentions to begin easing monetary policy as soon as the upcoming September meeting, though uncertainty still lies in the size of the first interest rate cut.Even though Fed policymakers adopted a “gradualism” stance, investors speculated that they could cut as high as 50 basis points (bps), according to the CME FedWatch Tool data. Nevertheless, next Friday’s US Nonfarm Payrolls report will be crucial following Fed Chair Jerome Powell’s statement that employment risks are tilted to the upside.After the US PCE report, traders raised bets of a 25 bps rate cut by the Fed at the September meeting, with odds at 69%, while the chances for a 50 bps cut came down to 31%.Ahead of the next week, the US economic docket will be rather busy, with the release of ISM Manufacturing and Services PMIs, jobs data, and the Balance of Trade.

Market Movers: Gold Price Retreated as Traders Trimmed 50-Bps Rate Cut Odds

The December 2024 Chicago Board of Trade (CBOT) fed funds future rates contract hinted that investors expect to see around 97 basis points of Fed easing this year.

The US core PCE reading for July showed that prices increased by 2.6% year-over-year, unchanged from the previous month but slightly below the 2.7% year-over-year estimate. The headline PCE came in at 2.5% year-over-year, underperforming the forecast of a 2.6% rise.

Consumer spending rose while income growth was sluggish, which raised concerns about whether Americans can maintain their current spending pace.

According to the University of Michigan (UoM), US Consumer Sentiment increased from 66.4 in July to 67.9 in August.

Inflation expectations for one year dipped from 2.9% to 2.8%, while medium-term expectations — over five years — remained steady at 3%.

Technical Outlook: Gold Price Rally Halted, Retreated Below $2,500
The gold price remained upwardly-biased on Friday, despite dipping below the $2,500 mark, but a ‘bearish engulfing’ chart pattern may loom on the horizon. The Relative Strength Index (RSI) suggested that sellers were in charge over the short-term despite showing mixed readings, as the RSI edged down but resided in bullish territory.If the XAU/USD cross could achieve a daily close below the $2,500 figure, the next support would be the Aug. 22 low at $2,470. Once surpassed, the next stop would be the confluence of the Aug. 15 swing low and the 50-day Simple Moving Average (SMA) at $2,431.Conversely, if XAU/USD could stay above the $2,500 mark, the next resistance would be the all-time high, and the following resistance would be the $2,550 mark. A breach of the latter would expose the $2,600 level. More By This Author:Gold Shines Despite Robust US Economic Growth
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