Gold price remains confined in a narrow range; US inflation data looms large

  • Gold price lacks any firm intraday direction amid a combination of diverging forces. 
  • Delayed Fed rate cut bets underpin the USD and act as a headwind for the commodity.
  • Geopolitical risks and the uncertain global economic outlook lend support to the metal.
  • Traders also seem reluctant to place directional bets ahead of the US PCE Price Index.

Gold price (XAU/USD) struggles to capitalize on the previous day's bounce from the $2,010-$2,009 area, or the weekly low and oscillates in a narrow trading band through the early European session on Friday. Traders opt to wait on the sidelines ahead of the US Personal Consumption Expenditures (PCE) Price Index, which should provide more cues about the timing of when the Federal Reserve (Fed) could begin cutting interest rates. This, in turn, will play a key role in influencing the US Dollar (USD) price dynamics and provide a fresh directional impetus to the non-yielding yellow metal.

In the meantime, the USD Index, which tracks the Greenback against a basket of currencies, stands tall near its highest level since December 13 amid diminishing odds for a more aggressive Fed policy easing in 2024. This is acting as a headwind for the Gold price, though a further decline in the US Treasury bond yields and persistent worries about geopolitical tensions stemming from the Middle East lend some support to the safe-haven precious metal. Nevertheless, the XAU/USD remains on track to register losses for the second straight week and now looks to the FOMC meeting on January 30-31.

Daily Digest Market Movers: Gold price extends the range play as traders keenly await US PCE Price Index

  • The benchmark 10-year US Treasury yield retreats further from over a one-month high touched last week and lends support to the Gold price for the second straight day on Friday.
  • Data released on Thursday showed that the US economy expanded at an annual rate of 3.3% during the fourth quarter of 2023, beating consensus estimates for a reading of 2.0%.
  • Further details of the report indicated that the core PCE Price Index was unchanged during the September-December period, suggesting that inflation pressures are receding.
  • This validated the view that the world's largest economy is more likely to avoid a recession and overshadowed a rise in the US Weekly Initial Jobless Claims, to 214K last week.
  • Separately, the US Census Bureau reported that US Durable Goods Orders were flat in December, while new orders excluding transportation and defense increased 0.3%.
  • Investors remain worried that the Israeli-Hamas war could trigger a broader regional conflict as multiple nations and armed groups continue targeting each other’s territories.
  • Adding to this, economists expect the global economy to weaken in 2024, which, in turn, is seen as another factor acting as a tailwind for the safe-haven precious metal.
  • Market participants, meanwhile, remain uncertain over the timing of when the Federal Reserve will start lowering borrowing costs amid a still-resilient domestic economy.
  • Traders now look to the US Personal Consumption Expenditures Price Index for cues about the Fed's future policy decisions and determine the near-term trajectory for the XAU/USD.

Technical Analysis: Gold price bears have the upper hand, might aim to test 100-day SMA support

From a technical perspective, any subsequent move up might continue to confront stiff resistance near the $2,040-2,042 supply zone. Some follow-through buying, however, might trigger a short-covering rally and lift the Gold price further to the $2,077 intermediate hurdle en route to the $2,100 round-figure mark.

On the flip side, the weekly low, around the $2,011 area, could offer some support ahead of the $2,000 psychological mark. A convincing break below the latter will be seen as a fresh trigger for bearish traders and pave the way for a slide to the 100-day Simple Moving Average (SMA), currently around the $1,975-1,976 area. The Gold price could eventually drop to test the very important 200-day SMA, near the $1,964-1,963 region.

US Dollar price today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Australian Dollar.

USD   0.01% -0.03% -0.08% -0.12% -0.08% -0.01% -0.05%
EUR -0.01%   -0.04% -0.08% -0.15% -0.08% -0.02% -0.06%
GBP 0.03% 0.04%   -0.05% -0.10% -0.03% 0.04% -0.02%
CAD 0.07% 0.09% 0.04%   -0.06% -0.01% 0.07% 0.03%
AUD 0.14% 0.15% 0.10% 0.06%   0.07% 0.14% 0.09%
JPY 0.07% 0.08% 0.06% 0.00% -0.06%   0.08% 0.04%
NZD 0.01% 0.02% -0.03% -0.07% -0.13% -0.09%   -0.05%
CHF 0.05% 0.06% 0.01% -0.03% -0.09% -0.03% 0.05%  

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 Personal Consumption Expenditures - Price Index (MoM)

The 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 MoM figure compares prices in the reference month to the previous month. Price changes may cause consumers to switch from buying one good to another and the PCE Deflator can account for such substitutions. This makes it the preferred measure of inflation for the Federal Reserve. Generally speaking, a high reading is bullish for the US Dollar (USD), while a low reading is bearish.

Read more.

Next release: 01/26/2024 13:30:00 GMT

Frequency: Monthly

Source: US Bureau of Economic Analysis

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