Gold Price Bounces Back on Soft US Employment Cost and PCE Data

Gold price faced a setback as the Greenback gained significant strength, boosted by the US economy’s resilience. The second-quarter GDP and demand for Durable Goods in June remained robust, primarily driven by increased consumer spending. As a result, concerns about a US recession have diminished considerably due to the optimistic state of the labor market.

However, the precious metal, represented by XAU/USD, managed to recover from its recent decline. The rebound was propelled by data showing softer-than-expected numbers for the Q2 Employment Cost index and core Personal Consumption Expenditure (PCE) price index. Initially, gold had been weighed down by the stellar performance of the US economy, strong demand for durable goods, and the tightening labor market conditions. Nonetheless, the path of gold price remains uncertain, and volatility is expected as renewed fears emerge over the possibility of the Federal Reserve (Fed) implementing further policy-tightening measures.

The surprising strength of the United States’ economy, as evidenced by higher than expected Gross Domestic Product (GDP) data, has alleviated worries of an impending recession. In addition, Fed Chair Jerome Powell’s recent commentary emphasized that Fed officials do not anticipate a recession despite the tight labor market conditions.

Looking ahead, the US Dollar is expected to experience fluctuations as market participants eagerly await the release of the Fed’s preferred inflation gauge and the Employment Cost Index data. These indicators will likely provide further insights into the future direction of the US economy and its potential impact on the Greenback.