As the trading week progresses, one of the most notable developments in financial markets is the continued weakness in gold. The precious metal has experienced significant declines for two consecutive sessions, with a short-term drop exceeding 5.00%, once again highlighting the clear bearish trend in control.
The US dollar remains a key alternative for investors, putting downward pressure on gold. Concurrently, market focus remains fixed on upcoming US economic data, which could reinforce expectations for a more aggressive policy stance from the Federal Reserve. As long as investors continue to price in expectations for higher interest rates and a stronger dollar, gold may face further selling pressure in the coming trading sessions.
Could US PCE Inflation Data Impact Gold?
On Thursday, the US will release its core PCE inflation data. The figure for May is expected to come in at 3.4%, slightly above the 3.3% recorded in April. This metric excludes food and energy, measuring the most recent month's inflationary pressures and providing a clearer view of underlying price trends.
This data release is particularly significant as it is one of the key inflation gauges closely monitored by the Federal Reserve. Markets have already begun pricing in a more hawkish central bank stance. Should the data meet or exceed expectations, it could further strengthen the likelihood of interest rate hikes in the coming months.
This could be a crucial factor for gold, as one of the primary elements suppressing its demand recently has been the market's expectation of further Fed policy tightening. According to data from CME Group, the market sees a nearly 50% probability of the Fed raising rates from the current reference level of 3.75% at its September 16th meeting. Therefore, the release of this PCE inflation data will help confirm whether this expectation remains valid, potentially reinforcing it further ahead of the remaining policy decisions in 2026.
The current environment is not favorable for gold. The potential for a more aggressive Fed policy stance is boosting the US dollar, as expectations for higher rates increase the appeal of dollar-denominated assets. This is reflected in the DXY index, a measure of dollar strength, which has broken strongly above the 101 zone to its highest level since 2026.
The combination of high interest rate expectations, persistent inflation, and a strong dollar continues to weigh on gold. Firstly, gold is priced in US dollars, so a stronger dollar makes it more expensive for investors using other currencies. Secondly, the US dollar and US Treasury bonds often become more attractive alternative assets when investors seek stability—particularly as bonds offer yield, while gold does not.
Consequently, the release of the PCE data could act as a significant catalyst in the next few trading sessions. If the data further reinforces expectations that the Fed will adopt a tighter policy, selling pressure on gold in US dollar terms is likely to persist in the short term.
Technical Outlook for Gold
As illustrated in the chart:
· The dominant downtrend line remains in place: The most important technical pattern on the daily chart continues to be the downtrend line that has been in place since March. This structure consistently reflects a clear selling bias. A potential bearish cross of the 50-period moving average below the 200-period moving average could confirm a stronger technical signal of weakness. However, the recent concentrated selling pressure may also open the door for a short-term corrective bounce.
· RSI: The RSI remains below the neutral 50 level, indicating that selling pressure continues to dominate recent price action. However, there are signs of a potential short-term bullish divergence, where the RSI holds at similar lows while the gold price makes lower lows. This signal could indicate oversold conditions, creating potential for a short-term corrective rally.
· MACD: The MACD histogram remains very close to the zero line, suggesting a relative balance between the short-term moving averages. This indicates that while the overall bearish bias persists, the recent directional momentum is not yet clearly defined.
Key Levels to Watch
· $4345 – Critical Resistance: This level is near a significant high and aligns with the longer-term downtrend line, making it the most important upside resistance. A break above this level could jeopardize the downtrend structure and potentially initiate a more meaningful bullish trend in the coming weeks.
· $4182 – Short-Term Hurdle: This recent neutral zone has now transformed into the nearest resistance reference. It could act as an initial hurdle if a short-term bullish correction unfolds.
· $3886 – Critical Support: This level is near the October 2025 low and currently represents the most important bearish threshold. If the price continues to move towards this area, the bearish bias could strengthen further, extending the current downtrend in the weeks ahead.
Comments