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Feb 29
2024

Gold price consolidates as focus remains on US core PCE Price Index

Gold price awaits the US core PCE Price Index data for a decisive move. The underlying inflation data will sharpen the interest rate outlook. Fed’s Collins expects the Fed’s path to 2% inflation will be bumpy.

Technical Overview

Gold price oscillates inside Wednesday’s trading range. The broader trend of the precious metal is sideways, trading in a Symmetrical Triangle, which could break out in either direction. However, the odds marginally favor a move in the direction of the trend before forming the triangle – in this case, up. A decisive break above or below the triangle boundary lines would indicate a breakout is underway. 

The downward-sloping border of the Symmetrical Triangle pattern is plotted from the December 28 high at $2,088, and its upward-sloping border from the December 13 low at $1,973.

The 14-period Relative Strength Index (RSI) remains confined in the 40.00-60.00 range, indicating a sideways trend.

Fundamental Overview

Gold price (XAU/USD) remains in a tight range in Thursday’s European session as investors seek fresh guidance on the interest rate. The precious metal will be guided by the United States core Personal Consumption Expenditure – Price Index (PCE) for January, which will be published at 13:30 GMT. The underlying inflation data will indicate whether Federal Reserve (Fed) policymakers are getting evidence, which could convince them that inflation will sustainably return to the 2% target.

Fed policymakers won’t be interested in lowering interest rates if price pressures remain stubborn. This would improve the appeal of the US Dollar and bond yields. The US Dollar generally attracts higher foreign inflows when the Fed maintains hawkish guidance on interest rates.

The market expectations for rate cuts in the March and May policy meetings are not expected to heighten significantly even if the inflation report turns out softer. Fed policymakers need good inflation data for months to consider a change in the monetary policy stance. Therefore, one good progressively declining inflation data point would not be enough to force policymakers to swiftly unwind their restrictive policy stance.

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