Key points:
Gold prices (Symbol: XAUUSD) edged lower on Tuesday, with the markets anticipating key US inflation data, namely the personal consumption expenditures index (PCE).
The PCE announcement on Friday could shed light on the stance of the Federal Reserve on interest rate cuts. Gold prices declined to $2,324.69 per ounce, driven by a surge in the US dollar.
The image above shows the how gold is under pressure, as observed on the VT Markets app.
A stronger US dollar makes gold more expensive for holders of other currencies, reducing its attractiveness. The US dollar index (Symbol: USDX) has been climbing, adding to the pressure on gold prices.
Related content: US dollar bullish in anticipation of the PCE inflation data release | VT Markets
The approach of the Federal Reserve to interest rates is key. Higher interest rates increase the opportunity cost of holding non-yielding assets like gold. Recent cautious approach to rate cuts from Fed officials have kept gold prices flat.
San Francisco Fed Bank President Mary Daly emphasised that the Fed should not cut rates until it is confident that inflation is headed toward 2%. However, she also noted the rising risk of unemployment.
Further, strong US economic data such as robust employment figures and business activity, reduces the need for safe-haven assets like gold.
All the above points towards a bearish case for gold, and as such in the short-term outlook of gold follows to be bearish. This has also been worsened with the sell-off last Friday, leading to the lackluster movement for gold holding on to the current levels.
As the market awaits the PCE inflation data, gold prices are likely to remain volatile. Traders should stay on top of economic indicators and Fed commentary to navigate the potential impact on gold and other precious metals, while technical analysis remains the primary guide to trade the markets intraday.
