Gold prices gain new highs upon encouraging core PCE reading
Gold futures on the COMEX (the world’s largest futures and options trading for metals) achieved gains that reached 2.73% at the height of its rise when it reached 1995.5 dollars an ounce, which is the highest level since June 1st, and returned to the levels of 1990 at 01:00 pm GMT.
As for spot gold price, it was also able to gain by 0.9%, at the height of the gains, as it reached the level of $1961.21 an ounce.
Gold’s gains today coincide with the issuing of U.S. personal consumer expenditure price index (PCE) for the month of June.
For the core PCE reading, which excludes energy and food prices and it is the Fed’s preferred inflation gauge, we have seen inflation continue to slow at a faster-than-expected pace, with an increase of 4.1% in June compared to June of the previous year, the lowest since October of 2021 and below expectations of 4.2%.
On the monthly reading, we saw the inflation grow by 0.2% in June, in line with analysts’ expectations and lower than the previous reading of 0.3%.
Today’s PCE figures came to reinforce the market’s expectations about the end of the Fed’s interest rate hike cycle, after the recent hike by 25 basis points and Jerome Powell’s less hawkish speech than before, and his talk about the continued decline in inflation, albeit not as quickly as expected.
This would weaken the US dollar, which would support the rise in dollar-denominated gold prices. While the markets now expect that the Fed will keep interest rates unchanged at its meeting next September, with a probability of 80%, compared to a probability of 20% that the Fed will raise again by 25 basis points.
Despite the rises in gold price, it may face pressure due to the rising bond yields. With the PCE figures announced, the US Treasury yields for two years bonds reversed their downward trend during today’s session, achieving gains of 1.47%, compared to the lowest level during the session, and returning to the level of 4.914%.