Gold price sticks to modest gains near three-week top, US PCE Price Index looms large
- Gold price hits a near three-week high amid bets for an early rate cut by the Federal Reserve.
- The US bond yields and the USD languish near a multi-month low, lending additional support.
- Traders now look to the US PCE Price Index for fresh cues about the Fed’s interest rate outlook.
Gold price (XAU/USD) gains some positive traction for the second straight day – also marking the fourth day of a positive move in the previous five – and climbs to a near three-week high on Friday. The precious metal sticks to its modest intraday gains through the first half of the European session, albeit lacks follow-through as traders seem more clarity over the timing of when the Federal Reserve (Fed) will begin cutting rates in 2024.
Hence, the focus remains on the US Core Personal Consumption Expenditure (PCE) Price Index, which will influence the Fed's future policy decisions and provide a fresh directional impetus to the non-yielding Gold price. In the run-up to the key data risk, bets that the US central bank pivot away from its hawkish stance early next year keep the US Dollar (USD) depressed near a multi-month low and lend some support to the XAU/USD.
Meanwhile, the current market pricing indicates a greater chance of a Fed rate cut move as early as March 2024 and 155 basis points (bps) of easing by the end of next year. This, along with the prospects of a global rate-cutting cycle, suggests that the path of least resistance for the Gold price remains to the upside. Nevertheless, the XAU/USD remains on track to register modest gains for the second week in a row.
Daily Digest Market Movers: Gold price flirts with multi-week high amid Fed rate cut bets, ahead of US PCE data
- Expectations for an imminent shift in the Federal Reserve's policy stance lift the Gold price to its highest since December 4 on the last day of the week.
- A slew of Fed officials recently tried to push back against the idea of rapid interest rate cuts next year, though failed to change investor sentiment.
- The CME Group's FedWatch Tool indicates a greater chance of a Fed rate cut move by March 2024 and 150 bps of cumulative cuts by the year-end.
- The bets were reaffirmed by data showing that the US economy grew by a 4.9% annualized pace in the third quarter vs. the 5.2% rise previously reported.
- The Labor Department reported that Initial Jobless Claims increased to 205,000 during the week ended December 16 and remained at historically low levels.
- The benchmark 10-year US Treasury bond yield hovers near its lowest level since July, while the US Dollar recovers a bid from a five-month through.
- This, along with the prospect of a global rate-cutting cycle, might continue to benefit the non-yielding yellow metal and favour bullish traders.
- A plunge in UK inflation during November, to its lowest rate in over two years, raised hopes that the Bank of England will start cutting rates in the first half of 2024.
- Adding to this, the recent run of softer inflation data from the Eurozone suggests that the risk is towards earlier rate cuts by the European Central Bank.
- The US Core Personal Consumption Expenditure (PCE) Price Index could offer cues about the Fed's policy outlook and provide a fresh impetus to the XAU/USD.
Technical Analysis: Gold price bulls might aim to test the next relevant hurdle near the $2,072-2,073 area
From a technical perspective, a move beyond the $2,047-2,048 region could be seen as a breakout through over a one-week-old consolidative trading range and favours bullish traders. This comes on the back of the occurrence of a golden cross, with the 50-day Simple Moving Average (SMA) crossing the 200-day SMA from below, and supports prospects for additional gains. Moreover, oscillators on the daily chart are holding in the positive territory and further validate the near-term constructive outlook. Hence, a subsequent strength towards the next relevant hurdle, around the $2,072-2,073 region, looks like a distinct possibility. The momentum could get extended further and allow the Gold price to reclaim the $2,100 round figure.
On the flip side, weakness below the aforementioned trading range resistance breakpoint could drag the XAU/USD back to the $2,028-2,027 region en route to the $2,017 horizontal support. A convincing break below the latter might prompt some technical selling and make the Gold price vulnerable to accelerate the slide towards the $2,000 psychological mark. This is closely followed by the 50-day SMA, currently around the $1,994 area, below which the downward trajectory could get extended further towards last week's swing low, around the $1,973 region, en route to a technically significant 200-day SMA, near the $1,958 zone.
US Dollar price today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.08% | 0.01% | 0.03% | 0.28% | 0.32% | 0.23% | 0.07% | |
| EUR | -0.08% | -0.04% | -0.06% | 0.20% | 0.23% | 0.16% | -0.01% | |
| GBP | -0.01% | 0.05% | 0.00% | 0.26% | 0.30% | 0.20% | 0.06% | |
| CAD | -0.04% | 0.06% | -0.02% | 0.26% | 0.30% | 0.21% | 0.03% | |
| AUD | -0.28% | -0.20% | -0.27% | -0.27% | 0.00% | -0.04% | -0.22% | |
| JPY | -0.32% | -0.24% | -0.28% | -0.29% | -0.03% | -0.08% | -0.24% | |
| NZD | -0.26% | -0.17% | -0.22% | -0.22% | 0.04% | 0.07% | -0.17% | |
| CHF | -0.10% | 0.02% | -0.05% | -0.03% | 0.21% | 0.23% | 0.18% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Economic Indicator
United States Core Personal Consumption Expenditures - Price Index (YoY)
The Core Personal Consumption Expenditures (PCE), released by the US Bureau of Economic Analysis on a monthly basis, measures the changes in the prices of goods and services purchased by consumers in the United States (US). The PCE Price Index is also the Federal Reserve’s (Fed) preferred gauge of inflation. The YoY reading compares the prices of goods in the reference month to the same month a year earlier. The core reading excludes the so-called more volatile food and energy components to give a more accurate measurement of price pressures." Generally, a high reading is bullish for the US Dollar (USD), while a low reading is bearish.
Read more.Why it matters to traders
After publishing the GDP report, the US Bureau of Economic Analysis releases the Personal Consumption Expenditures (PCE) Price Index data alongside the monthly changes in Personal Spending and Personal Income. FOMC policymakers use the annual Core PCE Price Index, which excludes volatile food and energy prices, as their primary gauge of inflation. A stronger-than-expected reading could help the USD outperform its rivals as it would hint at a possible hawkish shift in the Fed’s forward guidance and vice versa.
Author
Haresh Menghani
FXStreet
Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.
