Gold: Pullback to Offer Dip-Buying Opportunities Near This Key Level

LONDON (May 28) Gold prices turned lower after a positive start, driven by a small uptick in the US dollar after it had made a weaker start to the new week. After a very bright last few months, a bit of a pullback and side-ways action is always needed in strong uptrends.

Regardless of whether we will see some further short-term weakness following last week’s 3% drop is not going to materially change the long-term outlook, which remains bullish. With core PCE data coming up later in the week, I wouldn’t be surprised if gold were to remain in consolidation mode for much of this week.

Gold closed lower last week, although managed to bounce off its lows on Friday and enjoyed mild gains on Monday. The metal’s losses earlier in the previous week were triggered by profit-taking after it briefly poked its head above April’s all-time high but couldn’t hold on.

Investors were happy to take a profit after what has been a stellar last few months. Investors will be looking forward to key inflation data from both the US and Eurozone this week. The data could shed light on the timing of the first rate cut by the ECB and Fed, both of which have been pushed back again on the back of a much stronger-than-expected Eurozone wage growth and a solid US business activity report, which also showed a sharp rise on in services inflation.

Core PCE is this week’s key data release

As mentioned, the Fed’s favorite inflation measure will come out on Friday, putting all the major FX pairs and gold into focus. The core PCE figures will be published a week before the May jobs report comes. Until then, the dollar, and by extension, gold, may remain in a holding pattern.

Stagflation concerns are rising in the US, with price pressures remaining higher and incoming data mostly surprising negatively of late, which does not bode well for the economy. The PCE data could impact the timing of the first rate cut, currently expected well after the summer.

Investing.com