The gold rally enters its most critical phase this week as the market receives the US Core PCE data tonight, before attention turns to Federal Reserve Chairman Kevin Warsh’s speech in Jackson Hole on Friday.
For XAU/USD traders, these two events are crucial enough to determine whether the current bullish momentum can continue or if it will suddenly change direction.
For now, market sentiment is still leaning dovish towards the Fed after the FOMC minutes showed that most officials see the need for more data before deciding on the direction of policy. At the same time, inflation and the labor market are showing some signs of moderation.
However, the hawkish risk is not completely gone. Three FOMC members actually voted to raise rates by 25 basis points at the July meeting, while the Fed kept the federal funds rate at 3.50% – 3.75%.
So the question now is:
Will tonight’s data reinforce gold’s bullish sentiment, or trigger the biggest “correction” phase?
Current Market Sentiment
Fed Starts to Look More Dovish, But Hawkish Risks Remain
Markets are increasingly sensitive to data that could change Fed interest rate expectations.
The July FOMC minutes showed the Fed still sees inflation as too high relative to its 2% target, but at the same time there are risks to growth and the labor market. The Fed also stressed that its next decision will depend heavily on incoming data.
This is why tonight's Core PCE is so important.
If inflation continues to show signs of easing, the market could potentially increase expectations that the Fed could take a more accommodative stance.
This usually puts pressure on the US Dollar and bond yields, thus increasing the appeal of gold.
Conversely, if inflation heats up again, the market could start to question the dovish narrative.
Core PCE: Data That Could Change the Game
Core PCE is one of the inflation measures the Fed pays the most attention to because it tries to see underlying price pressures by excluding the more volatile food and energy components.
For July, the market expects:
Core PCE MoM: 0.2%
Core PCE YoY: 3.3%
Headline PCE YoY: 3.6%
Personal Spending: 0.2%
Personal Income: 0.3%
The data will be released along with the US Q2 GDP revision. The BEA confirmed its Q2 Second Estimate GDP and July Personal Income and Outlays report is scheduled for August 26.
What does this mean for gold?
If Core PCE is lower than expected, the market may see inflationary pressures easing.
➡️ Fed expectations more dovish
➡️ USD potentially weaker
➡️ Yields potentially lower
➡️ XAU/USD potentially higher
But if Core PCE is higher than expected:
➡️ Inflation risk remains high
➡️ Fed potentially more cautious
➡️ USD and yields potentially higher
➡️ Gold at risk of pressure
Key Data to Watch Tonight
Malaysian Time Data Expectations of Importance
8:30 PM Core PCE MoM (Jul) 0.2% 🔥🔥🔥🔥🔥
8:30 PM Core PCE YoY (Jul) 3.3% 🔥🔥🔥🔥🔥
8:30 PM PCE Price Index YoY 3.6% 🔥🔥🔥🔥
8:30 PM GDP Q2 Second Estimate 1.5% 🔥🔥🔥🔥
8:30 PM Personal Income 0.3% 🔥🔥🔥🔥
8:30 PM Personal Spending 0.2% 🔥🔥🔥
Note: All times above are Malaysian Time (MYT).
Friday: Kevin Warsh Could Change Everything
While Core PCE data is the focus tonight, the biggest risk to the XAU/USD trend this week could come on Friday.
Kevin Warsh will deliver the keynote address at Jackson Hole on Friday, August 28, in his first appearance as Fed Chairman at the symposium. The speech is scheduled for around 10:00 AM US time, which is around 10:00 PM MYT.
This is no ordinary speech.
The market is eager to hear how Warsh views the Fed's still-high inflation, interest rates and policy direction for the rest of the year.
At the same time, Friday also brings the preliminary benchmark payrolls revision for the year to March, which could provide a fresh look at the true strength of the US jobs market.
Friday Focus
Malaysia Time Why Is the Catalyst Important?
10:00 PM Fed Chair Kevin Warsh – Jackson Hole 🔥🔥🔥🔥🔥
10:00 PM Preliminary Benchmark Payrolls Revision 🔥🔥🔥🔥
If Warsh gives a more dovish signal than expected, gold could potentially receive another wave of buying.
But if he emphasizes inflation risks and the need to maintain tight policy for longer, the situation could change quickly.
XAU/USD Technical Analysis
From a technical perspective, the XAU/USD structure still shows bullish momentum.
Gold prices have just managed to break through a key resistance zone at:
$4,540.130
This breakout further strengthens the buying momentum and shows that buyers still have control over the current trend.
Now attention turns to the next resistance zone:
$4,824.645
This level is the next biggest test.
If the price manages to break through $4,824.645 firmly, the bullish momentum has the potential to develop into a new upward phase.
On the other hand, if the price fails to break through the zone and fundamental data starts to support the US Dollar, the $4,540.130 level will be an important area to watch.
Failure to hold this level after a breakout could be a sign that the previous breakout is starting to lose momentum.
Technical Bias
BULLISH
As long as XAU/USD remains above $4,540.130, the bullish structure is still considered valid.
Bullish vs Bearish XAU/USD Scenario
US Dollar Fundamental Scenario XAU/USD
🟢 Bullish Core PCE lower + weak GDP + slow spending ⬇️ Bearish 🚀 Potential upside
🟢 Bullish Strong Weak data + Warsh dovish + negative payroll revision ⬇️⬇️ 🚀🚀 Rally potentially accelerated
🔴 Bearish Core PCE higher + strong GDP + strong spending ⬆️ Bullish 📉 Potential downside
🔴 Bearish Strong Hot inflation + Warsh hawkish + positive payroll revision ⬆️⬆️ 💥 Risk of major correction
🟡 Neutral Mixed data + Warsh does not give clear direction ➡️ ↔️ Consolidation
IForecast
We sees the bias of XAU/USD still bullish, supported by market sentiment that is now more likely to expect the Fed to move cautiously than to tighten policy aggressively.
However, tonight's Core PCE is the first test.
A lower-than-expected inflation reading could reinforce the dovish narrative and give gold room to continue its momentum towards $4,824.645.
Conversely, a higher Core PCE could trigger a strengthening US Dollar and profit-taking activity in gold.
But the real story may not be over tonight.
Friday could be a bigger determinant.
Kevin Warsh's first speech at Jackson Hole and a review of benchmark payrolls data could potentially reshape market expectations for the Fed. Warsh's speech is crucial as the market is looking for clues on how the Fed will deal with inflation that is still above the 2% target.
In other words:
Core PCE could test the trend. Warsh could potentially set the direction for the future.
Trader Focus
8:30 PM tonight: The main focus is on Core PCE, GDP, Personal Income and Personal Spending.
Don't just look at the headline PCE numbers. Core PCE is more important for reading underlying inflation pressures.
If Core PCE is lower than expected, watch for potential USD weakness and a decline in Treasury yields.
$4,540.130 is now a key level to maintain the bullish structure.
$4,824.645 is the next major hurdle. A strong breakout could open the way for more aggressive bullish momentum.
Friday 10:00 PM MYT: Don't miss Kevin Warsh's speech at Jackson Hole as his dovish or hawkish tone could quickly change the XAU/USD sentiment.
Traders should be prepared for high volatility as this week is not just about one economic data point, the market is reassessing the Fed's direction for the September meeting and the rest of 2026.
Conclusion: The trend is still bullish, but two fundamental bombs await tonight's Core PCE and Kevin Warsh on Friday.
