To The Moon

PCE Index was released on 28 June 2024 (Friday) and this is one of the key indicator that Fed view as particularly important.

Since we understand that based on what the PCE numbers are going to be, investors might expect the Fed to cut (or not) interest rates in the future. And since the markets are forward-looking, those expectations are likely to already drive price moves.

Therefore, in this article, I would like to share on how If inflation (as measured by the PCE) is below expectations, gold will go up significantly, and if inflation (PCE) is above expectations, gold will go down significantly. But is this always the case?

Gold Rise To Trade In $2,330s After PCE Release For May

$Gold - main 2408(GCmain)$ rises to trade above the $2,330s at $2,360.63 on Friday (05 July) at time of this writing. It was already trading in the $2,330s on Friday (28 June) after the release of the US Personal Consumption Expenditures (PCE) Price Index for May. 

The PCE is the US Federal Reserve’s (Fed) preferred inflation gauge and it showed a cooling down in price rises to 2.6% year-over-year in May from 2.7% previously. The result was in line with expectations. Core PCE also slowed to 2.6% from 2.8% previously as expected. The data indicates inflation is steadily dropping towards the Fed's 2.0% target. 

If we looked at the past 3 PCE data, we could see that Gold price did make a move to the upside once we have a lower PCE.

Risk Factors Hedging And Long-Term Prospects For Gold

If we looked at the long-term prospects for Gold, that remain positive. The risk factors like geopolitical uncertainty in the Middle East, Ukraine, from climate change and tech-driven economic challenges are still present.

These factors have been feeding the demand for Gold to have investors putting it as a safe haven. Not forgetting the complex relationship with US Dollar (USD), while strong USD dollar is negative for Gold since it is priced in USD, but it has also increased the demand from mainly Asian central banks as a hedge against their own currencies’ devaluation against the US Dollar. 

The BRICS trade confederation is also using Gold as a replacement for the US Dollar as the primary medium for global trade. Given its position as a stable, safe store of value, Gold is the most reliable alternative as a means of exchange between nations with different, often volatile domestic currencies. 

These global trends or factors would continue to push Gold higher in the future – back up to  $2,400, although the kicker will be the Fed’s decision to finally begin cutting interest rates. 

Gold Broke Above Trendline

Gold is currently trading above the downsloping trendline, after making a breach of the line that connects the “Head” and “Right Shoulder” of the now invalidated bearish Head and Shoulders (H&S) pattern that formed on the precious metal during April, May and June.

This means that we could be expecting another new highs for Gold in the coming weeks.

How We Can Trade Gold From $SPDR Gold Shares(GLD)$

If we looked at GLD, it has been traded pretty positively above the 50-day MA period, and with Gold poised to move higher near $2,400.

As investors, we might want to spread our asset investment, including physical metal like Gold, we could look at investing in GLD.

Summary

Based on how Gold has been used as a store of value and more recently, safe haven for investors to consider during volatile times. The risk factors mentioned are still present, and we are going to see more news on inflation and also depreciating currencies. Gold would still be seen as a hedge against these.

Appreciate if you could share your thoughts in the comment section whether you think Gold would move higher and it is a good time to look into investing in GLD.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.

$SPDR Gold MiniShares Trust(GLDM)$ $iShares Gold Trust Micro(IAUM)$