US inflation data and employment report to shake the markets

The US’s PCE rates came in lower than expected, which could aid gold’s price. In addition, Friday’s US employment data is another key catalyst and test for gold traders.

Research Takeaway

Gold since our last report, has moved lower. Market participants may be focusing on the release of the US inflation data later on today which came in lower than expected. Moreover, emphasis also being placed on the US Employment data which is due out on Friday.

Research Desk View: Bullish

Gold in One Minute

The Gold Thesis

As this report was being written the US PCE rates for August where released. The PCE rates came in lower than expected both on a core and headline level, which came in at 3.0% and  2.6% respectively, implying a lower-than-expected acceleration of inflation in the US economy. In turn this could reduce pressure on the Fed to embark on an aggressive monetary policy restriction path, thus reducing expectations by market participants for another Fed rate hike. Therefore, as the expectations are reduced it could weigh on the greenback whilst aiding gold’s price considering the inverse relationship between the two. The next big test for traders may be the release of the US Employment data on Friday, which are expected to showcase a loosening labour market, which could further increase calls for the Fed to ease on its hawkish rhetoric. In turn this could provide support for the bullion.

Gold Drivers

Key Events

Technical Context

Gold appears to be moving in an upwards fashion having resurfaced above our 4200 (S1) support level. From a technical perspective, we may have to opt for a temporary sideways bias for the bullion as the RSI indicator still reads a figure close to 40, implying a bearish market sentiment, with the MACD indicator also showcasing bearish tendencies. We should note that they are lagging indicators. Nonetheless, for our sideways bias to be maintained, we would require gold’s price to test our 4350 (R1) resistance level and then remain in a sideways channel between our 4200 (S1) support level and the aforementioned R1 line. On the other hand we would switch our sideways bias for a bullish outlook in the event of a clear break above our 4350 (R1) resistance level ,with the next possible target for the bulls being our 4510 (R2) resistance line. Lastly, for a bearish outlook we would require a clear break below our 4200 (S1) support level if not also our 4080 (S2) support line with the next possible target for the bears being our 3945 (S3) support base

Short-Term Gold Levels

What Changes the View

The Gold Lens

The inflation data came in lower than expected which may have surprised the markets. In turn this could provide support for the precious metal’s price. Yet the next big test will be the US employment data on Friday, which is expected to showcase a loosening labour market. In such a scenario we may see gold’s price further gaining.

Key Variables to Remember

Disclaimer: This information is not considered investment advice or an investment recommendation, but instead a marketing communication.