The PCE index strengthened 0.6% in May, after rising 0.2% in April. However, the key PCE index rose to its lowest level since November 2021. The report said the core PCE index fell to 4.7% year-on-year in May, down slightly from 4.9% in April.

The initial spasmodic reaction led gold from $ 1803 at 8:30 a.m. EDT at $ 1825 over the next 15 minutes. The most active futures contract of August 2022 traded at its intraday high of $ 1826.80 at 9:00 am. The initial reaction to today’s inflation report created an upward trend in the gold market, as it was realized that this report would reduce the size of the next interest rate hike when the FOMC convenes for its meeting in July.

This optimism was short-lived at best because an hour and forty-five minutes later gold futures fell to $ 1805.10. As of 5:05 p.m., EDT gold futures are currently set at $ 1808, taking into account the current price drop of $ 9.50 or 0.52%.

Today’s fall in gold caused the gold to break below the support trend line created by a series of higher and lower prices. The first low used to create this trend line was on May 16, when gold traded at the low of $ 1785.30. The second low used was based on the $ 1806.60 low on June 14. The first level of potential support if gold continues under pressure appears at $ 1798, which is based on the low set on May 13.

However, our long-term studies using weekly candlesticks show that the current price drop falls within the parameters above the current support trend line, which was also created by two higher lows. The first low used was $ 1678 in mid-April 2021. The second low used in the second week of May was $ 1785. The current low remained above this trend line.

Today’s fall in price will result in gold closing lower on the day, the week, this month and this quarter. The release of today’s PCE price index will certainly be a key data point that the Federal Reserve will use to determine whether it will continue to raise interest rates by 75 basis points at this month’s FOMC meeting.

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