PCE May Delay Fed Rate Cuts, Boosting Gold Prices and Weighing on Oil

The US PCE data met expectations, and the slight increase in initial jobless claims in the US provided upward momentum for gold prices, briefly touching a one-month high.

US PCE suggests weakness in the world’s largest economy, which may weaken crude oil demand, while increased OPEC production also weighs on oil prices, causing them to rise and fall again on the last trading day of February.

Gold >>

On Thursday, US PCE data met expectations, and there was a slight increase in initial jobless claims in the US, providing upward momentum for gold prices.

Spot gold surged significantly during the US session, touching the USD 2050 mark, ultimately closing up by 0.48% at USD 2044.26 per ounce; COMEX April gold futures also rose by 0.59%, closing at USD 2054.7 per ounce.

Following the recent strong inflation data, the latest figures met expectations. The data showed that the US personal consumption expenditure (PCE) price index rose by 0.3% in January, while the core PCE price index rose by 0.4%.

This pressured the US dollar, making gold cheaper for investors holding other currencies. Traders’ attention shifted to further comments from Federal Reserve officials in search of clues about interest rate cuts.

Yesterday, gold technically experienced a rebound after an initial dip, followed by a deep V-shaped rebound, breaking through highs. Prices in the Asian and European sessions were pressured, experiencing slight fluctuations around the USD 2037 level before falling back.

In the late US session, prices further dipped below the USD 2030 level, stabilizing and rebounding around USD 2028. During the late US session, supported by positive PCE data, gold prices overall saw strong bullish momentum with a deep V-shaped rebound.

Eventually, prices accelerated higher, breaking through the recent high of USD 2041 and continuing to trade near USD 2050 before encountering resistance and pulling back. Overnight, gold prices dipped slightly to around USD 2042 before closing.

Technical Analysis:

Today’s short-term strategy for gold suggests prioritizing short positions during rebounds, with long positions considered as a secondary approach during pullbacks.

  • Key resistance levels to watch in the short term are around 2055-2060.
  • Key support levels to watch in the short term are around 2035-2030.

WTI Crude Oil >>

On Thursday, US PCE data hinted at weakness in the world’s largest economy, potentially dampening crude oil demand, while increased OPEC production also pressured oil prices.

WTI crude oil opened low and fluctuated, ultimately closing unchanged at USD 78.46 per barrel; Brent crude oil slightly rose by 0.06%, closing at USD 82.85 per barrel.

The US Personal Consumption Expenditure (PCE) index showed that January inflation met economists’ expectations, thus keeping the possibility of an interest rate cut in June.

Federal Reserve policymakers are not eager to cut interest rates as they need to observe more data to confirm that inflation rates will return to the expected level of 2%. Due to the risk of long-term interest rate constraints, the market is concerned about recent oil demand.

While high interest rates help many major Western economies control inflation, they typically lead to decreased oil demand, potentially reducing economic growth and oil demand.

Yesterday, oil prices technically maintained narrow consolidation at high levels. Prices retraced slightly during the Asian and European sessions, stabilizing around the USD 77.9 level before experiencing a rebound.

In the late US session, prices climbed slightly, breaking through the USD 79.2 level before encountering resistance and falling back, leading to a volatile close.

Technical Analysis:

Today’s crude oil trading strategy suggests prioritizing short positions during rebounds, with long positions considered as a secondary approach during pullbacks.

  • Key resistance levels to monitor in the short term are around 79.3-79.8.
  • Key support levels to monitor in the short term are around 77.2-76.7.

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