The price of gold has recorded its largest pullback since summer, with a drop of over 1.7% on Thursday, settling around $2,740 per ounce.
This movement comes after the gold metal flirted with new record levels, surpassing $2,780 per ounce in the previous session. This pullback reflects the resistance gold faces after an extended rally and overbought levels.
One of the primary triggers behind these movements was the release of the Personal Consumption Expenditures (PCE) price index in the United States, showing more persistent underlying inflation than expected.
Additionally, personal spending increased beyond expectations, reinforcing the notion of a resilient U.S. economy, which may complicate the Federal Reserve’s efforts to justify aggressive rate cuts. This has led to profit-taking in gold, following a bullish sentiment partly fueled by concerns over a growing U.S. fiscal deficit.
It is important to note that the political context will also play a crucial role. I maintain the view that a possible Donald Trump victory in the 2024 elections could add additional inflationary pressures due to his policies focused on tariffs and mass deportations. While this could favor gold by generating global uncertainty, it could also strengthen the U.S. dollar, limiting the precious metal’s appreciation potential.
In the short term, gold will likely face significant resistance around $2,700 per ounce, as discussed in previous weeks. The overbought conditions and a less favorable economic backdrop suggest that maintaining these levels could be challenging. However, central bank demand and global uncertainty remain factors that could support the metal against further substantial declines..
