Gold holds steady as traders focus on tomorrow’s PCE price index report

Gold futures basis the August 2024 contract, which is now the new most active contract had fractional gains today. In New York trading the August contract is currently fixed at $2366.50 after factoring in a gain of $2.40, or 0.10%. Currently, gold futures have resumed trading in Australia fixing the August contract at $2364.40 a $2.10 decline from the closing price in New York. Gains today were greatly aided by a weaker U.S. dollar and a yield decline in U.S. Treasuries. The dollar declined by 0.36% taking the index to 104.78.

Market participants are intently focused on the upcoming PCE price index report which will be released on Friday. The PCE price index is the preferred inflation metric used by the Federal Reserve which means the numbers revealed tomorrow could yield insight about the timing and magnitude of rate cuts this year. This week gold investors and traders have faced strong headwinds created by exceedingly hawkish statements by some Federal Reserve officials.

Current estimates according to MarketWatch are anticipating that inflation will show a year-over-year increase of 2.7%. If this forecast is correct, it would mean that inflation in April remained unchanged month over month when compared to March. That being said, this level of inflation is still well above the Fed’s 2% target.

Jim Wyckoff, Kitco's senior analyst, attributed the modest gains to "a little bit of bargain hunting after the dip in prices." He noted that the weaker dollar, lower yields, and recent stock market sell-off have provided bullish tailwinds for precious metals.

Additionally, the latest GDP figures revealed a slower economic growth rate in the United States for the first quarter than initially estimated.

The CME's FedWatch tool currently assigns a 50.5% probability of a Federal Reserve rate cut by September, with a 45.1% chance of a 25-basis-point reduction and a 5.4% likelihood of a 50-basis-point cut.

The CME's FedWatch tool currently assigns a 50.5% probability of a Federal Reserve rate cut by September, with a 45.1% chance of a 25-basis-point reduction and a 5.4% likelihood of a 50-basis-point cut.

Wishing you as always good trading,