Gold price remains topsy-turvy despite optimism over Fed rate cuts deepen

Gold price (XAU/USD) slips marginally below $2,040 ahead of the United States core Personal Consumption Expenditure price index (PCE) data for November, which will be released on Friday. The underlying inflation data is expected to soften further amid higher interest rates by the Federal Reserve (Fed).

Despite warnings from Fed policymakers that the central bank is currently focusing on keeping interest rates restrictive to ensure a return of inflation to 2%, investors lean toward investing in Gold due to optimism over rate cuts in 2024. Contrary to the median projection of three rate cuts by the Fed in its monetary policy announcement last week, Atlanta Fed Bank President Raphael Bostic sees only two rate cuts.

Daily Digest Market Movers: Gold price consolidates while US Dollar retreats

• Gold price faces nominal sell-off near 15-day high around $2,040.00. The broader appeal remains upbeat as expectations of rate cuts by the Federal Reserve in 2024 is outplaying the stance of keeping interest rates restrictive until price stability is ensured.
• The precious metal remains broadly strong despite the fact that Fed policymakers are playing down expectations of early rate cuts amid resilience in the United States economy.
• The majority of Fed policymakers have commented that the Fed is focused on bringing down inflation to 2% rather than rate cuts in 2024.
• Atlanta Fed Bank President Raphael Bostic said on Monday that there is no urgency for the central bank to lower borrowing costs. The priority of the Fed is to that inflation retreats to 2% as sheer strength in the US economy could delay progress in abating price pressures.
• Bostic added that rate cuts would be required in advance of underlying inflation returning to 2% to avoid any unnecessary blow in employment numbers. Bostic reiterated on Tuesday that he expects two rate cuts in 2024.
• As per the CME Fedwatch tool, market participants see almost a 70% chance in favour of a first rate cut by 25 basis points (bps) in March. The likelihood of a second rate cut in May is at 60%.
• On the contrary, Richmond Fed Bank President Thomas Barkin said that rate cuts depend on how the economy performs in 2024. While asked about economic prospects, Barkin commented that the economy is well-positioned with easing inflation and a steady Unemployment Rate.
• The US Dollar Index (DXY) found intermediate support near 102.00 after failing to extend recovery above 102.60 as rate cut expectations have dampened its fundamentals.
• This week, investors will focus on the core PCE price index data for November, which is scheduled for Friday.
• As per the consensus, monthly core PCE data is seen growing at a steady pace of 0.2%. On an annual basis, the Fed’s preferred inflation tool is expected to decline to 3.3% against the former reading of 3.5%.
• Apart from the Fed’s preferred inflation gauge, investors will focus on the US Durable Goods Orders data for November. Investors expect the demand for core goods grew by 2.2% against 5.4% fall in October.
• Meanwhile, geopolitical tensions between Israel and Palestine have started again, which would infuse some strength in bullions. 
• United Nations Security Council is in talks for a ceasefire in Gaza to deliver humanitarian aid to civilians.

Technical Analysis: Gold price trades below $2,040

Gold price faces selling pressure but remains inside Tuesday’s trading range as investors await the Fed’s preferred inflation gauge for further action. The broader appeal for Gold is bullish as its price is confidently sustaining above the 20-day and 50-day Exponential Moving Averages (EMAs). Momentum oscillators, namely the Relative Strength Index (RSI) (14), is hovering near 60.00. A decisive break above the same would trigger a bullish momentum.