The key gauge of US inflation expectations, as measured by the 10-year breakeven inflation rate, per the St. Louis Federal Reserve (FRED) data, remains on the back foot since peaking out from the record top during early May. That said, the sentiment gauge flashed a 2.42% figure by the end of Thursday.
With the US Federal Reserve (Fed) officials gaining support from Treasury Secretary, ex-Fed Chair, Janet Yellen in rejecting the reflation fears, the recent weakness in inflation expectations could weigh on the market sentiment, as well as on the gold prices.
However, today’s release of the US Personal Consumption Expenditure (PCE) Price Index for April and budget announcements become crucial events to watch, which in turn probe the trading mood.
Read: US PCE inflation preview: Gold remains key asset to watch
Although the US inflation figures are likely to favor the US dollar, upbeat expectations from the budget may tame the greenback’s upside, which in turn can keep the gold prices and boost market sentiment afterward unless any negative surprises pop up.