Gold flat lines below record high as traders look to US PCE data for fresh impetus
- Gold attracts some dip-buyers, though it remains below the all-time peak set on Wednesday.
- Fed rate cut bets keep the USD bulls on the defensive and offer support to the precious metal.
- Receding safe-haven demand might cap the commodity ahead of the US PCE Price Index.
Gold (XAU/USD) struggles to capitalize on a goodish intraday bounce from the $4,773-4,772 area on Thursday and remains below the all-time peak, touched the previous day. Bets for two more interest rate cuts by the US Federal Reserve (Fed) in 2026 fail to assist the US Dollar (USD) to build on the overnight move up and turn out to be a key factor acting as a tailwind for the non-yielding yellow metal.
Meanwhile, US President Donald Trump pulled back from his threat to slap additional tariffs on eight European nations and ruled out seizing Greenland by force. This, in turn, triggers a fresh wave of the global risk-on trade and caps the upside for the safe-haven Gold. Traders also seem reluctant and opt to wait for the US Personal Consumption Expenditures (PCE) Price Index before placing fresh directional bets.
Daily Digest Market Movers: Gold bulls seem cautious amid receding safe-haven flows and ahead of US PCE data
- The global risk sentiment gets a strong boost in reaction to US President Donald Trump's U-turn on Greenland and drags the traditional safe-haven Gold away from the record high, touched on Wednesday.
- Trump said at the World Economic Forum in Davos that he had reached an agreement on a framework for a future deal on Greenland with NATO, ending the need to impose new tariffs on European nations.
- The development removes the tail risk of a US confrontation with NATO allies, triggering the reversal of the “Sell America” trade, which acts as a tailwind for the US Dollar and further undermines the bullion.
- US Special Envoy Steve Witkoff announced a new meeting with Russian President Vladimir Putin that’s set to take place on Thursday amid progress with discussions over a US-led 20-point Ukraine peace plan.
- Meanwhile, Trump said on Wednesday that Ukrainian President Volodymyr Zelensky and Putin were now at a point where they could reach a deal to end the war, further undermining the precious metal.
- According to a Reuters poll, a majority of economists expect that the US Federal Reserve will hold its key interest rate through the end of this quarter and possibly until Chair Jerome Powell's tenure ends in May.
- Traders, however, are still pricing in the possibility of two more rate reductions in 2026. Moreover, concerns about political interference in the Fed's independent setting of rates cap the USD upside.
- Hence, the release of the US Personal Consumption Expenditure (PCE) Price Index, along with the final US Q3 GDP report, due later today, will influence the USD price action and drive the XAU/USD pair.
Gold setup favor of bulls; overbought conditions warrant some caution
The 100-hour Simple Moving Average (SMA) continues to rise and lies beneath the price, supporting the near-term uptrend. The XAU/USD pair holds above this gauge, keeping the bias tilted higher, with the SMA at $4,707.80 acting as dynamic support. The Moving Average Convergence Divergence (MACD) line remains below the Signal line and below zero, while the negative histogram contracts, suggesting fading bearish momentum. The Relative Strength Index (RSI) stands at 46 (neutral) after cooling from prior extremes.
Measured from the $4,535.22 low to the $4,889.37 high, the 38.2% Fibonacci retracement at $4,754.08 offers initial support, while the 23.6% Fibo. level at $4,805.79 cushions dips; holding above these supports would keep the recovery path intact. Near-term, continued price acceptance above the rising 100-hour SMA keeps the path of least resistance to the upside. Momentum would firm if the MACD turns up through its Signal line and the RSI reclaims 50, while failure to hold above the average would leave the market vulnerable to a deeper pullback and extend consolidation.
(The technical analysis of this story was written with the help of an AI tool.)
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
Author
Haresh Menghani
FXStreet
Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.
