Gold prices have fallen more than 5% this month, and their future direction will depend on tonight's US PCE data.

Gold prices rebounded briefly, but the monthly downtrend remains unresolved. With market expectations for further interest rate hikes by the Federal Reserve rising, the upcoming US PCE inflation data will be a key variable in determining the next move in gold prices.

On Wednesday, spot gold rose 0.3% to $4,193.7 per ounce, but its cumulative monthly decline still exceeded 5%. Meanwhile, the dollar continued its strong performance, further increasing the cost of gold for non-dollar investors and limiting the upside potential for gold prices.

Interest rate hike expectations remain one of the main factors suppressing gold prices. CME FedWatch data shows that traders expect a 47% probability of a Fed rate hike in October and a 91% probability in December. New York Fed President John Williams recently stated that policymakers may only need one more rate hike this year to push inflation back to the 2% target level.

Against this backdrop, PCE data will be a crucial indicator for the market to judge the Federal Reserve's future policy path. Lower-than-expected data could ease pressure for interest rate hikes and support gold prices; conversely, stronger-than-expected inflation could further push up yields and the dollar, putting pressure on gold. The PCE price index will be released at 8:30 PM Beijing time.

PCE data will influence the next move in gold prices.

Tony Sage, CEO of Critical Metals, stated that the PCE data will be a crucial test for gold's short-term price movement. The results could alter market expectations regarding the Federal Reserve's monetary policy and further impact US Treasury yields and the dollar's trajectory. If the data falls short of expectations, gold prices may find support and retest the $4200-$4300 range; conversely, stronger-than-expected data could push up yields and the dollar, putting renewed pressure on gold prices, potentially testing the $4100 level.

This transmission logic is also the key reason for the recent pressure on gold prices. Since gold itself does not generate interest income, rising interest rates increase the opportunity cost of holding gold; a stronger dollar raises the cost of gold for non-dollar investors. Under the combined influence of interest rate hike expectations and a strong dollar, gold prices have fallen by more than 5% this month.

The pressure also extended to other precious metals. On Wednesday, spot silver fell 0.3% to $61.30 an ounce; platinum rose 0.7% to $1,717.90; and palladium rose 0.5% to $1,229.15. Despite the mixed performance during the day, all three metals have recorded declines for the month.

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