Gold Price Forecast: XAU/USD loses ground to $2,020, US housing data eyed

Gold price (XAU/USD) edges lower to $2,020 during the early Asian session on Monday. The modest recovery of the US Dollar (USD), backed by strong US Services PMI data weighs on the yellow metal. However, the upside might be limited as the markets anticipate a rate cut by 75 basis points (bps) next year.

The Federal Reserve (Fed) left its interest rate unchanged at 5.25–5.50% at its meeting last week. Fed Chair Jerome Powell delivered a dovish stance, highlighting the goal to lower inflation at the end of 2023 with no planned rate hikes in 2024. On Sunday, Chicago Fed President Austan Goolsbee said it’s too early to declare victory in the central bank’s inflation fight, and decisions on interest-rate cuts would be dependent on incoming economic data. However, New York Fed President John Williams attempted to temper market expectations on Friday, emphasizing that it was premature to consider rate cuts.

A flash reading of US S&P Global Manufacturing PMI fell to the lowest level in four months, dropping to 48.2 in December compared to 49.4 in November and market expectations of 49.3. Meanwhile, the Services PMI climbed to 51.3 in December versus 50.8 prior, above the market consensus of 50.8. The Composite PMI grew to 51.0 in December from the previous reading of 50.7, the fastest pace in five months. In response to the data, the US Dollar (USD) attracted some buyers and rebounded from the multi-month lows, which acts as a headwind for the USD-denominated gold.

Looking ahead, market players will take more cues from the Fed’s preferred inflation gauge, the Personal Consumption Expenditures Price Index (PCE), due on Friday. Ahead of the key US inflation report, the US Building Permits and Housing Starts will be released on Tuesday. The Gross Domestic Product Annualized for the third quarter (Q3) will be due on Wednesday. These figures could give a clear direction to the gold price.