Gold Price Forecast: US PCE inflation refuses to come down, XAU/USD sell-off continues

  • Gold price remains bearish despite improving market mood.
  • Core PCE accelerates again in January, disinflation trend is halted.
  • US Dollar stays dominant across the board, denting XAU/USD.

Gold price continues to trend down on Friday as the US Dollar strength remains on most of the market board despite 10-year US Treasury bond yields declining below 3.9% on Thursday, which still failed to trigger gains for the yield-less bright metal, although it helped to limit the downside somewhat. The US Personal Consumption Expenditures (PCE) Price Index release, the Fed’s preferred measure of inflation, came out hot, with all monthly and annual figures for both the headline and the core numbers beating market expectations. Gold price is trading at year-to-date lows below $1,820.

Gold news: US Core PCE inflation stays hot

The Core PCE Price Index, the Fed’s preferred gauge of inflation, for the month of January surprised already high expectations by printing a monthly growth of 0.6% (vs 0.4% expected). Gold traders triggered another sell-off after the data posted by the US Bureau of Economic Analysis (BEA), as annual Core PCE inflation came also higher than expected (4.7% vs 4.3% expected, and higher than the 4.6% seen in December 2022.) 

Headline figures also were bigger than what the market consensus had priced in, and the market reaction has been straightforward, with Gold price triggering another sell-off leg, getting closer to $1,800.

Commerzbank bearish on Gold price as sentiment improves

Strategists at Commerzbank believe there is room for more downside on Gold price if US macroeconomic data keeps showing positive results:

The disappointment over the more restrictive Fed policy that we are likely to see after all has left its biggest mark on the Gold market. This is because US real interest rates have climbed again as a result. In this sense, a ‘good’ PMI in the US threatens to weigh on prices.

Gold price: US Treasury bonds, the US Dollar and inflation dynamics

Gold is a non-yielding asset – holding it does not provide regular revenue – so it usually remains negatively correlated with United States Treasury bond yields. The benchmark US 10-year bond yield was constantly on the rise for most of 2022 as a response to the Federal Reserve raising interest rates to combat skyrocketing inflation. 

Price pressures remain high early in 2023, but Consumer Price Index (CPI) readings in the US and other big economies have shown signs of slowing down, and economists project this disinflation trend to continue through the rest of the year. A prolongation of this trend should help Gold price regain some footing from the demand side.

Treasury yields are not the only asset to track for Gold price (XAU/USD). The yellow metal is primarily traded in US Dollar terms, which makes it really vulnerable to currency market action. When the USD rallies against other major currencies and becomes the go-to asset, like it has been doing for the most part of the last year, Gold price tends to trend down as well. Of course, US Treasury yields and the US Dollar are highly correlated, so these dynamics are intertwined. 

Gold price in 2023: Up-and-down action

Financial markets have been a two-tale story for the early part of 2023, in which Gold price has reflected in its price action like no other asset. XAU/USD rode an uptrend during all of January with the market optimism about inflation slowing down and constant Federal Reserve dovish talk, only to see a drastic turnaround back to the old dynamics in February after a hot US Nonfarm Payrolls (NFP) report. The US economy adding more than 500K jobs in the month of January shifted the market expectations for the Fed easing its monetary policy, and the US Dollar has come back to the market King throne.

Gold price opened the year at $1,823.76 and reached a year-to-date high of $1,960 on February 2, right in between the first Federal Reserve meeting of the year and the surprising release of the US jobs report for January. Since then, the ongoing downtrend has been relentless, reaching levels close to the yearly open, around $1,830.

Gold price daily chart, downtrend continues after US PCE inflation

Gold price daily chart

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Follow us on Telegram

Stay updated of all the news

Join Telegram

Recommended content

Follow us on Telegram

Stay updated of all the news

Join Telegram

Recommended content

Editors’ Picks

AUD/USD holds onto RBA gains, ahead of Lowe and key data Premium

AUD/USD holds onto RBA gains, ahead of Lowe and key data

AUD/USD rose for the fourth consecutive day on Tuesday, reaching weekly highs above 0.6650. The positive tone around the Aussie prevails following the recent rate hike by the Reserve Bank of Australia. Governor Lowe will speak on Wednesday, and Australian GDP data is also due.


EUR/USD replicates sluggish markets around 1.0700 amid challenges for ECB hawks, Fed blackout Premium

EUR/USD replicates sluggish markets around 1.0700 amid challenges for ECB hawks, Fed blackout

EUR/USD licks its wounds around 1.0700 as bulls and bears jostle during a sluggish week comprising unimpressive data and the Fed blackout. The Euro price pared intraday losses during late Tuesday but remains sidelined as the early Asian session morning restricts the market’s moves.


Gold edges higher as US Dollar, yields dribble on mixed Fed concerns

Gold edges higher as US Dollar, yields dribble on mixed Fed concerns

Gold price seesaws around $1,963 amid the early hours of Wednesday’s Asian session, after a two-day rebound within a short-term trading range. In doing so, the XAU/USD pays little heed to the US Dollar’s slightly positive performance.

Gold News

Arbitrum community to vote for AIP budget proposal as ARB hints 10% gains

Arbitrum community to vote for AIP budget proposal as ARB hints 10% gains

The Arbitrum community has published the draft for the AIP budget proposal, voting to commence on June 9. The proposed budget aligns with the Foundation's strategic needs to represent and service the DAO. Three elements stand out concerning the Foundation's Administrative Budget Wallet.

Read more

Readying for hawkish Fed

Readying for hawkish Fed

S&P 500 made two runs over 4,300, yet was rejected in each. Bonds though didn‘t paint universally negative picture – only the sectoral composition of the decline did.

Read more