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The U.S. July Personal Consumption Expenditures (PCE) price index was released today, with data coming in across the board above market expectations. The U.S. dollar strengthened in response, and gold, which had risen for three consecutive sessions, fell sharply, formally completing a bearish “Evening Star” candlestick pattern on the daily chart.
PCE Beats Across the Board, Rate Hike Expectations Edge Up
Data from the U.S. Bureau of Economic Analysis showed that the July PCE price index rose 3.7% year-over-year and 0.2% month-over-month, both 0.1 percentage point above consensus estimates. Core PCE, which excludes food and energy, came in at 3.3% year-over-year and 0.2% month-over-month, both in line with expectations, suggesting underlying inflationary pressures are stabilizing.
Meanwhile, the second-quarter GDP annualized rate was confirmed at 1.5%, matching market expectations, while July durable goods orders surged 1.1% month-over-month, more than double the 0.5% increase analysts had projected. Consumer spending and income data also edged slightly above forecasts, further reinforcing the narrative of an economy that remains resilient.
Following the data release, interest rate futures markets priced in the probability of a September rate hike at roughly 40%-42%, up from around 36% previously, while the probability of a December rate hike approached 77%. The U.S. dollar index climbed approximately 0.25% to around 99.14, putting direct downward pressure on dollar-denominated gold.
“Evening Star” Pattern Confirmed, 200-Day SMA Becomes Key Bull-Bear Battleground
Spot gold closed Wednesday down 1.36% at $4,594.68 per ounce, after touching an intraday low near $4,583. The previous two sessions had produced a long bullish candle and a doji, respectively, and Wednesday’s large bearish candle officially confirmed the classic three-day “Evening Star” reversal pattern.
On the technical front, gold is now testing support at the 200-day simple moving average (SMA), currently located near $4,590 — with prices holding only marginally above that level. Analysts suggest that if the daily close breaks below $4,594 (the August 24 low), further downside could open up, with the first target near the 200-day SMA around $4,378, followed by the swing low at $4,324. On the upside, gold needs to reclaim the $4,600 level to alleviate near-term downward pressure, with further resistance at $4,650 and the psychological $4,700 level.
Notably, silver declined alongside gold but held up relatively better on this move. Silver has historically acted as an amplifier for gold price moves — leading both rallies and selloffs. Its recent failure to play that leading role is a divergence worth monitoring.
Geopolitical Easing and Profit-Taking Combine to Weigh on Gold
Beyond the data factor, easing geopolitical tensions also diminished gold’s safe-haven demand. Reports indicated that Iran and Oman reached an agreement on revenue distribution related to the Strait of Hormuz, raising expectations for the strait’s reopening and keeping oil prices near recent lows. Should the strait be fully reopened, global energy supply pressures would significantly ease, further reducing the tail risk of upside inflation surprises.
Additionally, gold had already rallied roughly 15% in August, marking its strongest monthly gain in four months. Substantial profits had accumulated in speculative long positions, and the policy expectation shift triggered by the PCE data provided a catalyst for profit-taking.
Looking Ahead
Market attention now turns to Federal Reserve Chair Kevin Warsh’s speech at the Jackson Hole Global Economic Symposium on Friday. Should he strike a hawkish tone, reinforcing the rebound in real rates, gold’s near-term correction pressures could intensify further. Conversely, if his remarks lean dovish, gold may find support near the 200-day SMA and regain its upward momentum.
