Gold staged a short-term rebound, but its monthly decline remains unresolved. As expectations for further Federal Reserve rate hikes build, the upcoming US PCE inflation report is set to become the key variable determining gold's next move.

On Wednesday, spot gold rose 0.3% to $4,193.7 per ounce, yet its cumulative loss for the month still exceeds 5%. Meanwhile, the US dollar continued its strength, further raising the cost of buying gold for non-dollar investors and capping the metal's upside potential.

Rate hike expectations remain one of the primary factors weighing on gold. According to CME FedWatch data, traders see a 47% probability of a Fed rate hike in October and a 91% chance in December. New York Fed President John Williams recently said policymakers may only need one more rate increase this year to bring inflation back to the 2% target.

Against this backdrop, the PCE data will serve as an important basis for the market to gauge the Fed's policy path ahead. A reading below expectations could ease rate hike pressure and support gold prices; a stronger-than-expected inflation print, however, could push yields and the dollar higher, pressuring gold. The PCE price index is scheduled for release at 20:30 Beijing time.

PCE Data to Shape Gold's Next Move

Tony Sage, CEO of Critical Metals, said the PCE data will be a major test for gold's short-term trajectory, and the result could shift market expectations for Fed monetary policy, further influencing US Treasury yields and the dollar. If the data comes in below expectations, gold could find support and once again challenge the $4,200 to $4,300 range; if it exceeds expectations, yields and the dollar could climb, weighing on gold anew and putting the $4,100 level to the test.

This transmission logic is also the crux of gold's recent pressure. Because gold itself generates no interest income, rising rates increase the opportunity cost of holding it; a stronger dollar raises the cost of buying gold for non-dollar investors. Under the combined effect of rate hike expectations and a strong dollar, gold has fallen more than 5% cumulatively this month.

The pressure has extended to other precious metals as well. On Wednesday, spot silver fell 0.3% to $61.30 per ounce; platinum rose 0.7% to $1,717.90; and palladium gained 0.5% to $1,229.15. Despite mixed intraday performances, all three metals have recorded declines this month.