On Wednesday, gold fell below $4,000 to hit its lowest level since early November last year. Since then, it has managed to stage a modest rebound, which briefly took it back above $4,050. Relief that yesterday’s US inflation update came out in line with expectations triggered a pullback in the US dollar.
This certainly helped gold to find some support, and the bulls will now be hoping that the area around $4,000 now acts as support. But in the same way that the dollar was overdue for a pullback, the precious metal was overdue for a rebound. Consequently, it may be too early to sound the ‘all clear’.
For a start, while expected, Core PCE inflation still came in at its highest level since October 2023, while the headline figure is now more than double the Fed’s 2% inflation target. According to the CME’s FedWatch Tool, investors still assign a 78% probability to at least one 25-basis point rate hike before year-end.
Also, while gold’s daily MACD is looking oversold, it is not as oversold as it was back in March. That means there is a possibility of another attempt by sellers to flush out the longs.
Source: TN Trader
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