Gold prices eased on Wednesday, trading around $4,642.74 per ounce for spot gold and $4,700.70 for U.S. gold futures, after reaching a three-month high in the previous session. This consolidation comes as investors keenly anticipate the release of the U.S. Personal Consumption Expenditures (PCE) Price Index for July and Federal Reserve Chairman Kevin Warsh's speech at the Jackson Hole symposium on Friday.
The PCE data, which is the Fed's preferred inflation gauge, saw an increase of 3.7% in the 12 months through July, slightly above economists' forecast of 3.6%. Following this data, traders are now pricing in a 38% chance of a rate hike next month, up from 36% before the data, and a 62% chance the Fed will leave rates unchanged. Prior to the data, some analysts believed softer-than-expected inflation combined with a dovish message from Warsh would be most supportive for gold.
Despite the recent dip, the overall outlook for gold remains bullish for some analysts. Peter Grant, vice president and senior metals strategist at Zaner Metals, stated that the uptrend in gold is reasserting itself, with potential to go back above $5,000 this year and reach new all-time highs by the second quarter of 2027. Gold often loses its appeal in a high-interest-rate environment, but a weaker dollar and declining U.S. bond yields, partly due to the U.S. Treasury's bond buyback announcement, have been supportive factors for the precious metal.
Institutional demand for gold has also seen a resurgence, with gold-backed exchange-traded funds experiencing $6.4 billion in inflows this week, totaling 46.7 tonnes. This marks the largest inflow in over 10 months and suggests a shift towards real asset allocation, rather than just futures positions. Continuous demand from central banks further supports the market. The gold market is now closely watching Warsh's speech for further guidance, with expectations for him to balance persistent inflation, weakening economic conditions, and elevated treasury yields.
Technical analysis suggests that gold's recent breakout through the $4,500 psychological mark, which included the 200-day Simple Moving Average, was a key bullish trigger. While the subsequent move has struggled above the 50% retracement level, indicating some caution, the path of least resistance is seen as upward. Spot gold could retest resistance at $4,681, with a break potentially leading to gains in the $4,707 to $4,743 range.
