Gold steady ahead of PCE report

The price of gold continues to cling to a narrow range around $1,990 on Friday, buoyed by escalating tensions in the Middle East while grappling with the impact of positive US economic indicators. Geopolitical concerns emanating from the Israel-Palestine conflict provided a cushion for the precious metal, countering the effects of robust Q3 Gross Domestic Product (GDP) and Durable Goods Orders in the United States.

Israeli-Palestinian tensions intensified as the Israeli army conducted a brief ground raid in Gaza. Additionally, a senior Hamas official urged allies to intervene, seeking defence against a potential full-scale Israeli invasion. Meanwhile, the risk of Iran-backed Hezbollah’s involvement looms large, supported by Western nations favouring Israel.

The gold market faced some selling pressure following the release of encouraging economic data from the United States. The US Bureau of Economic Analysis (BEA) reported a robust 4.9% growth in the US economy for the July-September quarter, exceeding expectations and reinforcing the Federal Reserve’s vision of a “soft landing” amidst persistent inflation challenges. Consumer spending, driven by a tight labour market and increased government expenditure, played a pivotal role in this growth.

However, the report also highlighted a contraction in business investments due to elevated borrowing costs. Firms adapted by relying on existing inventory and improving efficiency to meet consumer demands. Despite these positive figures, gold prices found support in the face of geopolitical uncertainties in the Middle East.

Investor focus now shifts to the upcoming release of Core Personal Consumption Expenditure (PCE) inflation data for September, scheduled for 13:30 GMT. This crucial metric is expected to sway the Federal Reserve’s decision-making process leading up to its November 1 monetary policy meeting.