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Gold, XAU/USD, Powell, Breakeven Rates, PCE, Inflation – Talking Points
- Gold prices lower as Powell launches anti-inflation gamble again
- Tonight’s U.S. PCE inflation data unlikely to support precious metals prices
- XAU/USD price likely to be between 20-day SMA and 1800
Gold prices are likely to remain under pressure as it becomes increasingly clear that central bankers are ready and willing to sacrifice economic growth to fight inflation. At a meeting in Portugal, Federal Reserve Chairman Jerome Powell spoke with the European Central Bank (ECB) and Bank of England (BOE) governors about his hopes for a soft landing, but he is aware of the bank’s main goals It’s inflation, even at the expense of slower economic growth.
Central bankers prefer to avoid recession if they can. However, the Ukraine war and the ensuing sanctions on Russia have created severe price pressures in the global economy. Meanwhile, consumer demand in the U.S. remained strong during the summer months, likely due in part to a backlog of demand caused by years of Covid-related restrictions. Data from the Transportation Security Administration shows the number of passengers passing through checkpoints – a proxy.
In addition, loose stimulus measures that could lead to higher prices due to the outbreak will continue to be implemented by state governments. California recently announced that it will distribute a round of stimulus checks. Other states have engaged in their own measures to alleviate high prices for taxpayers, whether it’s tax deductions for certain items or their own stimulus checks. While these measures are well-intentioned, they could add further inflationary pressures or keep prices high for longer.
The net result of increased consumer spending could force the Fed to take a more aggressive stance, potentially raising rates more quickly. The Fed’s aggressive stance has caused breakeven rates to plummet in recent weeks. Tonight, the US will see its May Personal Consumption Expenditure (PCE) data meet expectations. Analysts expect core prices to be the Fed’s preferred indicator of hidden volatility.
Gold Technical Forecast
Gold prices are on track for a third straight weekly decline after lowering over the past few days. The psychological level of 1,800 is a little more than 1% below the current price. Meanwhile, the falling 20-day simple moving average capped intraday upside this week. However, a directional breakout may occur in XAU after the price breaks out completely above or below these levels.
XAU/USD Daily Chart
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