GOLD NUDGES HIGHER DESPITE LACK OF MAJOR BULLISH DRIVERS

The precious metal may soon have to face the reality of the Fed funds rate remaining higher for longer after inflation data proved worrisome on Friday. A string of hotter-than-expected price data culminated in Friday’s PCE print where both headline and core inflation beat expectations.

Increasing attention has been placed on shorter-term measures of price trends like the month-on-month comparisons, which has been rising – which hasn’t gone unnoticed at the Fed. Jerome Powell acknowledged the undesirable uptick in inflation but reiterated that policy is poised to react to any outcome and the Vice Chairman of the Fed, John Williams even made mention of another hike is needed.

The prospect of higher inflation has forced markets to backtrack on ambitious rate cuts initially eyed for 2024, extending the dollars longer-term strength. A stronger dollar and rising yields have had little effect on the precious metal when geopolitical uncertainty was at its peak, but with the recent de-escalation and in the absence of any further catalysts, gold bulls may soon run out of momentum.

Gold bounced off of support at $2320 – a prior swing low. If prices remain above this level, the bullish continuation remains constructive. However, in the absence of a catalyst, the upside potential may be greatly reduced.

（Source:Dailyfx-Richard Snow）