Gold Takes Breather Ahead of Fed’s Preferred PCE Data

Gold prices posted a modest slide on Thursday, with the yellow metal seeming to have taken a breather from a recent rally, as investors anticipate further signals on the Federal Reserve’s monetary policy through the Personal Consumption Expenditures (PCE) Price Index data due later in the day.

Spot gold shed 0.16% to $2,041.10 per ounce, while gold futures for December delivery lost 0.31% to $2,040.80 per ounce.

The two instruments rose between 2.5% and 3.1%, marking their second consecutive month of solid increases. Spot prices also now have a $30 distance from a record high reached earlier this year.

Fed’s Preferred PCE Data In Focus

The yellow metal rallied this week as officials at the Fed said the recent tumbles in inflation presented the possibility of the US central bank pausing any additional hikes on interest rates.

Another slide in inflation may lead the Fed to reduce rates in early 2024.

The trend indicated some relief on gold from a tight monetary policy, which has weighed down the yellow metal in the last 18 months.

Investors are now focused on more cues on the inflation of the world’s largest economy, awaiting the reading of the PCE price index, the central bank’s preferred inflation gauge, set to be published later in the day.

The data is expected to contribute to the Fed’s view on interest rates in the coming months.

The core PCE price index, which excludes food and energy costs, is estimated at a 3.5% year-over-year growth in October, falling from the 3.9% logged in the previous month. The headline PCE price index for October is forecast to have a 3.0% annual rise after climbing 3.4% in September.

Markets will also pay attention to Fed Chair Jerome Powell’s upcoming speech on Friday, which would be his last statement before the central bank’s two-week blackout period ahead of the meeting on December 13.

The Fed is widely seen leaving rates unchanged at 5.25%-5.50% in its final meeting for the year.

A looser monetary policy, especially the prospect of the central bank cutting interest rates as soon as March 2024, can help strengthen gold prices, considering high interest rates raise the opportunity cost of purchasing the yellow metal.