The USA will release Personal Consumption Expenditures (PCE) data at 20:30 Beijing time on Friday. This preferred inflation index by the Fed may bring more positive news, prompting officials to continue monitoring the labor market when deciding on the pace of interest rate cuts.

Last week, the Fed lowered the federal funds rate target by 50 basis points, indicating their increased confidence in inflation returning to the 2% target level. It is widely expected that the PCE data will provide additional support for this stance.

Economists surveyed by FactSet expect the report to show an overall PCE year-on-year rate of 2.3% in August, further cooling down from the decrease to 2.5% in July; the overall PCE month-on-month growth rate is expected to be 0.1%, slightly lower than July's 0.2%.

Meanwhile, economists predict that the core PCE year-on-year rate, excluding food and energy prices, will slightly increase from 2.6% in July to 2.7%.

However, the most anticipated data point to be released on Friday will be the core PCE monthly rate. Economists unanimously believe that the August core PCE month-on-month growth rate will be close to 0.2%, consistent with the price increases in June and July.

However, at least some economists, including Fed Governor Waller, expect that last month's core PCE month-to-month rate was only 0.14%, rounded to 0.1%. If this turns out to be correct, according to Waller's estimate last week, the core PCE annual rate for the past four months will be below 1.8%, lower than the Fed's 2% target.

Waller said: "This makes me say, 'Wow, inflation is dropping much faster than I thought.' This makes me feel that the 50 basis point rate cut was the right move.

Walle pointed out that the persistent presence of core inflation remains narrowly focused on the housing sector. But this situation may eventually change. Researchers at the San Francisco Fed estimate that by the end of this year, the annual housing inflation rate will drop to 2%.

Citigroup economist Veronica Clark wrote: 'As the Fed continues to lower interest rates, the most direct risk of reigniting inflation will come from the housing and rental markets.' But she pointed out that Fed Chair Powell and Atlanta Fed President Bostic both hinted, 'They are willing to overlook the still strong housing inflation shown in official data as long as the rise in new rental prices slows down.'

With inflation seemingly under control, Federal Reserve officials have shifted their focus to the other side of their dual mandate - ensuring maximum employment. Over the past few months, the unemployment rate has steadily risen, and hiring has cooled significantly.

Data released on Thursday showed that the number of initial jobless claims remained low last week. However, economists, analysts, and Fed officials are anxiously awaiting the September employment report to be released on October 4.

However, officials are also cautious about the direction of inflation. Walle pointed out that officials were surprised by the acceleration of inflation in the first quarter, so they are now remaining vigilant.

Is a major overhaul of gold imminent?

The CME's FedWatch tool shows that despite recent dovish comments from Fed policymakers and mixed US economic data, market expectations for a 50 basis point rate cut in November have eased, currently at 50%, down from about 62% a day ago.

As market bets on a substantial Fed rate cut at the next meeting gradually fade, this seems to drive a new round of recovery for the US dollar, curtailing the record-breaking rebound in gold prices. However, dovish remarks from Fed Governor Brainard overnight and China's latest stimulus measures continue to limit the downside of gold prices.

The upcoming most popular inflation indicator from the Federal Reserve will determine the next directional trend of gold prices and expectations of a significant rate cut by the Federal Reserve in November.

Higher-than-expected core PCE inflation data may push down expectations of a November rate cut by the Federal Reserve, triggering a recovery in the US dollar against major currencies. In this case, gold prices may sharply correct from historical highs. Conversely, unexpected downward core PCE data may increase the likelihood of a significant rate cut by the Federal Reserve again, at the expense of the US dollar, pushing gold prices to new historical highs.

However, the response to the PCE inflation report may be temporary, as end-of-month and end-of-quarter outflow of funds may come into play and stir the market. Traders may also be affected by the significant impact of the USA next week.non-farm payroll dataProfit-taking on gold was done before.

In addition, Federal Reserve Governor Bauman's speech at 1:15 a.m. the next day may increase the potential volatility of gold prices.

Fxstreet analysts point out that from a short-term technical perspective, the price of gold is still in extremely overbought territory, indicating that a significant correction may be imminent. 14 daysRelative Strength Index（RSICurrently trading above the 76 level, indicating that bulls need to be cautious. If gold regains its upward momentum, breaking through the historical high of $2686 will be crucial for further upward movement towards the $2700 level and the psychological barrier of $2750.

Conversely, any correction in gold prices could test the low of $2623 on September 24. If it falls below this level, the psychological support level of $2600 may come into play. Further down, gold bears may target the low of $2585 on September 20.

Editor/rice