Gold prices staged a robust recovery on Thursday, driven by dip-buying from investors capitalizing on recent lows, as market attention shifts to the upcoming U.S. Personal Consumption Expenditures (PCE) data release on Friday.
Spot gold rose 1.3% to $2,658.40 per ounce, rebounding from a two-week low of $2,622.10 earlier in the session, according to Reuters.
The rally follows a 2.5% decline over the past week, prompted by a stronger U.S. dollar and profit-taking after gold hit an all-time high of $2,790.15 in April 2025.
With the PCE data, the Federal Reserve’s preferred inflation gauge, expected to influence interest rate expectations, investors are bracing for potential volatility in the precious metal market.
Dip-Buying Fuels Gold’s Recovery
The resurgence in gold prices reflects bargain hunting by investors after a recent pullback. Analysts note that physical demand, particularly from Asia, has bolstered the market, with gold ETF inflows rising 3.2% globally in May, per the World Gold Council.
Central banks, including those in India and Turkey, added 15 metric tons to their gold reserves in Q1 2025, signaling sustained institutional interest. However, due to gold's pricing in U.S. currency, a stronger dollar, up 0.8% this week per Bloomberg data, capped gains.
A jeweler in Mumbai reported a 10% spike in retail purchases, underscoring robust demand at lower price points. Investors are now eyeing whether gold can reclaim the $2,700 mark ahead of key economic data.
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PCE Data Looms Large
According to a Reuters poll, we expect the U.S. PCE data, due Friday, to show core inflation steady at 2.7% year-over-year for April. A higher-than-expected reading could strengthen the dollar and pressure gold prices, as markets anticipate tighter Federal Reserve policy.
Conversely, a softer report may fuel expectations of rate cuts, boosting gold’s appeal as a non-yielding asset. Goldman Sachs forecasts gold reaching $2,800 by Q3 2025 if inflation cools, citing its role as an inflation hedge.
However, TD Securities warns that persistent inflationary pressures could push yields higher, with 10-year Treasury yields at 4.62% on Thursday, potentially curbing gold’s upside.
Did You Know?
Central banks have purchased over 1,100 metric tons of gold annually since 2022, accounting for nearly 25% of global demand, per the World Gold Council.
Market Outlook and Risks
Despite the rebound, gold faces headwinds from macroeconomic uncertainty. The Federal Reserve’s cautious stance on rate cuts limits gold’s near-term potential, with only one 25-basis-point cut projected for 2025 per CME FedWatch.
Geopolitical tensions, including ongoing U.S.-China trade disputes, continue to support safe-haven demand, with gold’s safe-haven premium estimated at $150 per ounce by UBS.
Technical analysts highlight $2,600 as a key support level, with resistance at $2,680. As markets await PCE data, traders are positioning for short-term volatility, with COMEX gold futures showing a 1.8% uptick in trading volume on Thursday.
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