XAU/USD After US headline PCE inflation is somewhat higher than anticipated, gold continues to drop. While core inflation stays constant at 3.3% in July, headline inflation stands at 3.7%, above the 3.6% predicted. With markets still putting in a 36% likelihood of a September rate rise, the data had little effect on Fed forcasts.
As of this writing, gold (XAU/USD) is down 0.83% for the day at $4,620. After the Federal Reserve's (Fed) preferred inflation gauge was released, bearish pressure on the precious metal somewhat increased, although the information had little effect on market expectations for the central bank's September meeting. The Personal Consumption Expenditures (PCE) Price Index increased 3.7% YoY in July, according to the Bureau of Economic Analysis (BEA). This increase was somewhat higher than the 3.6% that markets had predicted but remained constant from June. In line with market forecasts, the core PCE Price Index, which does not include volatile food and energy costs, was stable at 3.3% YoY in July. Both the PCE Price Index and the core PCE Price Index increased by 0.2% each month
At first, the slightly higher-than-anticipated headline data put some downward pressure on gold since ongoing inflation may bolster the argument for maintaining high US interest rates. But the news doesn't seem solid enough to drastically alter expectations for monetary policy by the Federal Reserve. The CME FedWatch Tool indicates that markets are still pricing in a 36% possibility of an interest rate rise at the Fed's September meeting, leaving around a 64% chance that borrowing rates will stay the same. In general, these probabilities are comparable to those seen prior to the PCE release.
