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Gold rises ahead of key US inflation data release 

May 27, 2024

Key points: 

  • Gold rises to $2,339.9 a troy ounce, recovering from recent losses. 
  • Market focus shifts to the U.S. Personal Consumption Expenditures (PCE) price index release this coming Friday. 
  • Federal Reserve minutes dampened hopes for rate cuts, impacting gold prices last week. 

Gold (Symbol: XAUUSD) rose to $2,339.9 a troy ounce on Monday, making small gains and recovering some of the losses from Friday’s session when the precious metal closed at its lowest level in two weeks.

The attention has now turned to the upcoming US Personal Consumption Expenditures (PCE) price index, which is the Federal Reserve’s preferred measure of inflation, set for release this Friday. 

The PCE data will be closely scrutinized for clues about the Fed’s potential pathway towards monetary easing. High interest rates typically depress demand for gold, which does not yield interest.

Gold performance in May

Last week, gold prices fell after the release of the Federal Reserve minutes, which included pessimistic commentary on the prospects for rate cuts.

This sentiment has pressured gold, as the minutes suggested that rate cuts might not be imminent. 

Significance of gold performance 

The performance of gold often reflects market sentiment regarding inflation and interest rates. In the 2008, gold prices surged as investors sought a safe haven in economic uncertainty.

Similarly, in 2020, gold prices hit record highs driven by fears of economic downturn due to the COVID-19 pandemic and the subsequent monetary easing by central banks. 

Related article: How to trade gold 

What traders should look out for 

Gold prices may see further volatility as market participants await the new PCE price index data. If the data suggests persistent inflation, gold could face downward pressure due to expectations of prolonged high interest rates.

On the other hand, if the new PCE data indicates that inflation is easing, it may boost gold prices as investors anticipate potential rate cuts by the Fed.  

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