Today’s report revealed that there is only marginal relief from rising inflation which continues at a record pace. The Federal Reserve’s preferred inflation report, the Personal Consumption Expenditures price index was released today. Inflation as seen through the PCE came in at 6.3% year-on-year for May equaling inflationary pressures for April.
The initial knee-jerk reaction took gold from $1803 at 8:30 AM EDT to $1825 over the next 15 minutes. The most active August 2022 futures contract traded to its intraday high of $1826.80 at 9:00 AM. The initial reaction to today’s inflation report created bullish market sentiment for gold as it was perceived that this report would decrease the size of the next rate hike when the FOMC convenes for its July meeting.
Today’s price decline resulted in gold breaking below the support trendline created from a series of higher lows. The first low used to create this trendline occurred on May 16 when gold traded to a low of $1785.30. The second low used was based upon a low of $1806.60 that occurred on June 14. The first level of potential support should gold continue under pressure occurs at $1798 which is based upon the low that occurred on May 13.