Source: Jin10 Data
Author: Wu Yu.

On Thursday, following the release of the Fed's preferred inflation data, spot gold and silver continued to decline, with spot gold falling below $2750 per ounce, dropping nearly $20 since the PCE announcement, and falling over 1% intraday. Spot silver fell by 3% intraday.

The September PCE report is one of the last key economic data releases before the Fed's meeting on November 6-7, indicating that the Fed's struggle with inflation is not yet over.

Excluding volatile food and energy, core PCE in September grew by 2.7% year-on-year in the USA, slightly above the expected 2.6%, and unchanged from the previous value of 2.7%. Personal spending in the USA recorded a strong monthly rate of 0.5% in September, exceeding the expected 0.4% and the previous value of 0.3%.

Some analysts warn that this may prompt the Fed to lower policy rates to a range of 4.5% to 4.75% next week and then maintain them at that level.

"We believe that due to concerns about inflation picking up again, the Fed will pause any rate cuts in December," wrote Michael Landsberg, Chief Investment Officer at Landsberg Bennett Private Wealth Management.

After the latest series of data releases, traders are still betting that the Federal Reserve is likely to continue lowering short-term interest rates by 25 basis points next week. Futures contracts linked to the Fed policy rate show a probability of around 94% for a 25 basis point rate cut next week, while the probability of another 25 basis point rate cut in December is around 70%.

The recent rise in gold has also been supported by uncertainty surrounding the US presidential election. However, opinion polls show Trump and Harris in a neck-and-neck position, making it hard to predict the winner in the highly anticipated final stages of the American election.

Ole Hansen, Head of csi commodity equity index Strategy at Sheng Bao Banks, stated that the US presidential election on November 5th is seen as a significant risk event for precious metals, which could push gold prices up by over $100 per ounce.

Gold has surged by more than a third this year, supported by central bank purchases and safe-haven demand due to geopolitical tensions in the Middle East and Ukraine. However, the strong rise has pushed the 14-day Relative Strength Index (RSI) for the precious metal above 70, a level that may indicate the market is overbought.

Furthermore, with hopes for a ceasefire in the Middle East, gold may fall as safe-haven fund flows reduce. The US has dispatched a new envoy to mediate a peace agreement between Israel's Hamas and Hezbollah. Early signs indicate that Israel, after successfully expelling Hezbollah from southern Lebanon, dismantling its hierarchy and severely weakening Hamas's capabilities in Gaza, is open to negotiations.

However, the threat of Iran opening a direct front against Israel remains a potential risk. Additionally, with escalating rumors of North Korean troops aiding Russia, the risk of intensifying Russia-Ukraine conflict persists.

Analyst Rhona O'Connell from stonex stated that potential drivers stimulating gold demand include geopolitical tensions and uncertainty in election results, with the market still in a 'buy on dips' mode. 'Gold, along with the (US dollar), both act as safe havens, which is not uncommon during times of conflict,' he said.

Meanwhile, UBS Group expects gold to reach $2900 per ounce by the end of the third quarter of 2025. The bank believes, 'A Trump victory may push gold towards this target faster, while a Harris victory may bring gold back to $2600-2700 per ounce.'

From a technical perspective, Fxstreet analyst Joaquin Monfort stated that overall, gold is steadily rising in all time frames (short-term, medium-term, and long-term). Given the technical principle of "the trend is your friend," this implies more upside potential. He expects gold's pullback to find support at the top of the previous trading range at $2758, then $2750. However, the overall uptrend is likely to resume afterwards.

Earlier, gold has already broken out of the narrow range between $2708 and $2758, rising to a historical high of $2790 on Wednesday. Breaking above the range top helps confirm the continuation of the upward trend to the next target level, potentially at the psychological level of $3000, and surpassing $3000 will activate the next upside target at $3050.

Editor/Jeffy