Gold prices (XAU/USD) rallied sharply early Thursday as the US core Personal Consumption Expenditure Price Index (PCE) for January softened in line with expectations. The lower-than-expected inflation strengthens expectations of a potential June rate cut by the Federal Reserve (Fed), reducing the opportunity cost of holding non-yielding Gold.
Annual core PCE inflation slowed to 2.8% as anticipated, down from December’s 2.9%. Monthly growth of 0.4% also met forecasts. This data supports a softening US Dollar and bond yields, both positive factors for Gold. Traders closely monitor the PCE as the Fed’s preferred inflation gauge, offering a clear picture of price pressures without the distortions of volatile food and energy prices.
While the soft inflation report may not significantly alter expectations for rate cuts in March or May, Fed policymakers will need sustained positive data to consider a major policy shift. Despite this, Gold has rebounded sharply near $2,050 on the news, eyeing a potential upside breakout from a Symmetrical Triangle pattern on the daily chart.
Triangles generally offer no directional bias, but the pre-existing upward trend slightly favors a bullish breakout. A decisive move above the upper trendline, formed from the December 28 high at $2,088, would signal the breakout. Further bullish momentum could materialize if the 14-period Relative Strength Index (RSI) breaks above 60.00.