Traders in bullion markets spent Thursday in a holding pattern, with gold hovering around the $2,000-an-ounce mark as participants awaited the U.S. personal consumption expenditures (PCE) price index due on Friday. The PCE reading, closely watched by the Federal Reserve for decisions on interest rates, is set to determine whether the central bank leans toward additional easing or delays further cuts.

A modest retreat in the dollar offered some immediate support for bullion. The U.S. dollar index eased after session highs, making dollar-priced gold cheaper for holders of other currencies and underpinning demand. Market participants said gold’s lack of a clear directional move reflected that uncertainty: softer data would likely bolster bullion by reducing the attractiveness of higher-yielding assets, while a hotter-than-expected PCE could lift real yields and weigh on prices.

San Francisco Federal Reserve Bank President Mary Daly reinforced the narrative that markets are watching closely. Daly told reporters Wednesday she "fully supported" the Fed's decision to cut its policy rate last week and signalled she expects further reductions ahead. Her comments reinforced expectations that policymakers are preparing to shift focus back toward the labour market and that the recent rate cut may not be the last.

"The move may reflect expectations that the Fed intends to run the U.S. economy hot as it rebalances its focus to the labour market," said Ilya Spivak, head of global macro at Tastylive, capturing a common market interpretation that policy easing could lift inflation risk and support non-yielding assets such as gold.

Analysts underline that gold’s path remains tightly linked to real interest rates and inflation expectations. When nominal yields fall or inflation expectations rise, the opportunity cost of holding zero-yield bullion declines and investment flows into gold tend to increase. Conversely, an unexpected uptick in inflation-adjusted yields would likely exert downward pressure. Investors are also watching positioning in exchange-traded funds and central bank purchases, both of which have been steady influences on the metal’s multi-year trend.

Short-term traders are focused on the Friday PCE print and subsequent market reaction; longer-term investors are weighing whether central banks’ policy frameworks and global geopolitical risks will sustain demand for safe-haven assets. Should PCE data point to persistent inflation, strategists warn the Fed could pause further cuts, strengthening the dollar and pressuring gold. If inflation appears to cool, gold could regain momentum as real yields fall.

For now, the market’s consensus view is one of cautious vigilance: traders are pricing in a narrow range, awaiting the data that will clarify whether the Fed’s recent easing represents a new trajectory for policy or a temporary adjustment in response to softer economic readings.