Today's PCE Data May Define the Gold Trend
Gold (XAU) has been moving sideways within 2,325–2,363 throughout the week, awaiting today's US Personal Consumption Expenditure (PCE) Price Index data. Yesterday, XAU/USD gained 0.22%.
The PCE data is crucial as it clarifies how the US Federal Reserve (Fed) might plan its monetary policy this year. The data will be released today at 12:30 p.m. UTC. A rise in the PCE numbers could put downward pressure on gold, but more data may be needed to break the broader upward trend in XAU/USD as traders will likely start active buying near 2,300. Yesterday's Jobless Claims and Gross Domestic Product reports showed that the US economy grew more slowly than expected in Q1. Many investors and traders have already lost hope for a rate cut in the near future, especially given the recent hawkish tone from Fed officials. The path to achieving 2% inflation will be longer than previously anticipated.
Additionally, the Reserve Bank of India (RBI) purchased just over 100 tonnes of gold from the U.K., according to the Times of India. China and India have recently increased their gold reserves in domestic storage. There are speculations that the countries may secure themselves by accumulating gold in case of potential external threats.
"The RBI began purchasing gold a few years ago and decided to undertake a review of where it wants to store it, something that is done from time to time. Since the stock was building up overseas, it was decided to bring some of the gold to India," a report quoted an official as saying.
The spot gold price was 2,343, increasing by 2.5% over the last month. XAU/USD is now awaiting today's US PCE data at 12:30 p.m. UTC. If the PCE numbers are higher than expected, the US dollar will rise while gold may decline towards 2,300. Lower-than-anticipated figures will likely bring the USD down, and gold may rise towards 2,365
Key Inflation Reports Will Affect Euro Today
The euro (EUR) increased by 0.3% on Thursday as the US dollar (USD) weakened and bond yields declined despite the market's cautious risk sentiment.
The US Gross Domestic Product (GDP) growth rate slowed, aligning with market expectations. The US economy expanded at an annualised rate of 1.3% in Q1, down from the initial estimate of 1.6%. The second estimate matched market forecasts and indicated the lowest growth since the beginning of 2022. According to the CME's FedWatch Tool, the chances of a rate cut by the Federal Reserve in November have increased. Currently, markets see a 63% chance that the regulator will hold interest rates steady and over a 50% probability of at least one 25-basis-point rate cut.
Yesterday's US Jobless Claims report was mostly in line with the market forecast. The number of people claiming unemployment benefits in the US increased by 3,000 towards 219,000 in the week ending 25 May, slightly above market expectations of 218,000. Although the initial claims count remained below the high levels seen in May, it still significantly exceeds the average numbers from February to April, reflecting a softening in the US labour market.
EUR/USD decreased during the Asian trading session. Today, the main events are the eurozone Harmonized Index of Consumer Prices (HICP) report at 9:00 a.m. UTC and the US Personal Consumption Expenditures (PCE) Price Index data at 12:30 p.m. UTC. If the HICP numbers show higher-than-expected inflation, the European Central Bank (ECB) could adopt a more hawkish stance, and the euro would rise. Similarly, the US Personal Consumption Expenditures (PCE) Price Index will play a crucial role in defining the EUR/USD trend. Higher-than-expected PCE figures could strengthen the US dollar, as the chances for a rate cut by the Fed will decrease, pushing EUR/USD lower.
Bitcoin Rises as the US Dollar Weakens
Bitcoin (BTC) increased by 1.13% yesterday as the US dollar weakened and bond yields declined.
US Securities and Exchange Commission (SEC) Commissioner Hester Peirce, along with U.K. regulators, has proposed a joint 'digital securities sandbox' for the US and U.K. This initiative will provide a special safe harbour, allowing companies in both regions to experiment with blockchain technology for trading securities without fear of regulatory repercussions. Authorities are signalling a more supportive stance on digital assets by initiating such a project. This could lead to increased institutional interest and investment in Bitcoin as the regulatory environment becomes more accommodating and clear.
Moreover, the collaboration between US and U.K. regulators may set a precedent for other countries to follow, potentially leading to a more globally coordinated regulatory framework for cryptocurrencies. This could reduce the uncertainty and risk associated with investing in digital assets, further boosting Bitcoin's attractiveness. Overall, the establishment of a 'digital securities sandbox' could enhance the legitimacy and adoption of blockchain technology and cryptocurrencies, increasing market confidence and contributing to Bitcoin's long-term growth.
During the Asian trading window, BTC/USD rose but then declined in the early hours of the European session. Today, the US Personal Consumption Expenditures (PCE) Price Index will be released at 12:30 p.m. UTC. Higher-than-expected PCE figures could strengthen the US dollar and push BTC/USD lower as the chances for a rate cut by the Federal Reserve will decrease. Meanwhile, lower-than-expected data may boost BTC/USD. Overall, this key inflation report is likely to increase volatility in the pair.