Gold price (XAU/USD) declines to around $4,020 during the early Asian session on Friday. The precious metal extends the decline as traders have ramped up bets of a US rate hike. The Michigan Consumer Sentiment Index report is due later on Friday. Also, Federal Reserve (Fed) New York President John Williams and Fed Bank of Minneapolis President Neel Kashkari are set to speak.
Data released by the US Bureau of Economic Analysis (BEA) on Thursday showed that the core Personal Consumption Expenditures (PCE) Price Index, the Fed’s primary price gauge, rose 3.4% YoY in May, compared to 3.3% in April. The annual core PCE reading was the highest since October 2023.
Meanwhile, the headline PCE inflation climbed to 4.1% YoY in May from 3.8% in April. Both core and headline figures came in line with expectations.
Markets continued to expect the US central bank to approve a rate hike in September, though they lowered odds slightly. It’s worth noting that Gold is often used as a hedge against inflation but does not yield interest, making it less attractive when interest rates are high.
Traders will closely monitor the Middle East developments. Bloomberg reported on Thursday that a ship was hit by an unknown projectile in the Strait of Hormuz, just hours after several freighters turned around while attempting to cross the vital waterway. Any signs of renewed tensions in the Middle East could raise concerns over elevated inflation, weighing on the yellow metal.
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