Gold Prices Fall Over 1%, PCE Data Remains Neutral To Slightly Hot, But Institutions Remain Bullish For The Outlook!

The global gold market has seen a significant correction,Spot goldThe single-day drop exceeded 1%, interrupting the previous sprint toward high levels. On the surface, it seems like just one rightUnited StatesThe immediate reaction to inflation data is intertwined behind the scenesThe US dollarstrengthening,Federal ReservePolicy expectations are fine-tuned, geopolitical uncertainties, and profit-taking in the market.

The U.S. Department of Commerce's July Personal Consumption Expenditures (PCE) Price Index showed a steady year-on-year increase of 3.7%, slightly above the market expectation of 3.6%; Month-on-month, it rose 0.2%, also higher than the expected 0.1%. Core PCE maintained a year-on-year increase of 3.3%, and a quarter-on-quarter increase of 0.2%. This set of figures neither brought a noticeably higher-than-expected acceleration in inflation nor continued the cooling momentum seen in previous months, showing an overall neutral to slightly hot characteristic.

For gold, this outcome directly changed the market's pricing of the Federal Reserve's policy path. The CME FedWatch tool shows that investors' probability of a Fed rate hike in September rose from about 36% before the data release to around 40%, while the probability of keeping rates unchanged dropped to 60%. In a high interest rate environment, non-yielding gold is

naturally at a relative disadvantage, making it easier for funds to flow into dollar assets to achieve higher returns. Before the data was released, gold prices had already taken some profits. After the PCE results generally met expectations, prices mostly consolidated within the previous day's fluctuation range rather than starting a new one-sided downtrend. This judgment has somewhat eased market concerns about a complete weakening in gold prices.

Besides the PCE itself, other economic data released on the same day also provided a more complete picture of the market. The revised year-on-year GDP growth rate for the second quarter remained unchanged at 1.5%, but consumer spending growth was revised up to 3.4%, indicating that personal consumption, which accounts for about two-thirds of the US economy, remained quite resilient in the first half. Corporate profits grew significantly, private domestic final sales growth was revised up to 4.2%, and AI-related investment remained strong, all indicating that economic growth in the third quarter is likely to accelerate.

As long as the pattern of high real interest rates coexisting with geopolitical risks does not fundamentally change, the underlying logic of gold as a safe-haven and inflation-resistant asset still holds. Gold's upward trend is beginning to re-establish itself, with the potential to return above $5,000 this year and potentially reaching a record high before the second quarter of 2027. This view reflects the continued optimism of some institutions regarding structural demand, including central bank gold purchases and geopolitical hedging.

Market Insight:

The market will next focus on the wording of Friday's chairman's speech, subsequent inflation and employment data, and the actual progress of geopolitical negotiations. If inflation becomes more sticky and economic growth remains strong, the Fed's policy path may become more cautious or even hawkish, and gold may continue to fluctuate; However, with geopolitical risks rising again or expectations for real interest rates loosening, there is still a possibility that gold prices will challenge the high level again or even move toward $5,000.