Gold Price Forecast: XAUUSD pressured as core PCE jumps, justifying further Fed action


  • Gold price records a fresh three-day low spurred by a strong US Dollar.
  • The Fed’s preferred gauge for inflation, the Core PCE, smashed estimates, justifying additional action.
  •  US Treasury bond yields jumped, with the 10-year eyeing to recoup the 4% threshold.

Gold price slides and extends its losses below $1650 due to stubbornly high US inflation reported namely the Core Personal Consumption Expenditures (PCE), the Federal Reserve’s favorite gauge of inflation, which increased more than estimates, bolstering the US Dollar. Therefore, the XAUUSD is trading at $1641.62, diving 1.23%, eyeing the weekly lows of around $1638.

The Fed’s gauge of inflation justifies additional tightening

On Friday, the US Commerce Department revealed that September’s US inflation, as measured by the Core PCE, which strips volatile items like food and energy, jumped 0.5% MoM, higher than the previous reading, while annually based, escalated by 5.1%, above 4.9% forecasts by street’s analysts. In a separate report, the Employment Cost Index (ECI), an indicator used by the Fed in addressing inflation on wages, increased by 1.2% in the July-September period, as reported by the Department of Labor.

Given the backdrop, the so-called Fed pivot narrative could be tossed away as inflation remains stubbornly high and salaries are rising, despite the Federal Reserve’s effort to tame inflation.

Of late, additional US economic data was reported, with the University of Michigan (UoM) Consumer Sentiment unchanged at 59.9. Consumer’s inflation expectations for the 1-year horizon easied from 5.1% to 5%, and for a 5-years and beyond, were unchanged at 2.9%.

US Dollar bolstered on PCE data, Federal Reserve meeting eyed

After the data was released, the XAU remained on the defensive, as the reasons above will justify further Fed tightening. The US Dollar Index, a measure of the buck’s value against six currencies, is up 0.20%, at 110.78, while US Treasury yields, namely the 10-year benchmark rate, recover five bps up at 3.973%.

In the meantime, Wall Street holds to gains amidst a decent earnings season, keeping US equities in the green.

Now market participants turn to the next week’s Federal Reserve Open Market Committee (FOMC), in which most analysts expect the Fed to hike rates by 75 bps, as reported by the CME FedWatch Tool, with odds at an 84.5% chance. However, December’s meeting is split between 50 or 75 bps, with the majority of the investors

Gold Key Technical Levels

XAU/USD

Overview
Today last price 1640.93
Today Daily Change -22.32
Today Daily Change % -1.34
Today daily open 1663.25
 
Trends
Daily SMA20 1668.91
Daily SMA50 1687.29
Daily SMA100 1732.02
Daily SMA200 1810.93
 
Levels
Previous Daily High 1670.86
Previous Daily Low 1654.88
Previous Weekly High 1668.53
Previous Weekly Low 1617.35
Previous Monthly High 1735.17
Previous Monthly Low 1614.85
Daily Fibonacci 38.2% 1660.98
Daily Fibonacci 61.8% 1664.76
Daily Pivot Point S1 1655.13
Daily Pivot Point S2 1647.02
Daily Pivot Point S3 1639.15
Daily Pivot Point R1 1671.11
Daily Pivot Point R2 1678.98
Daily Pivot Point R3 1687.09

 

 

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