- Gold price struggles to gain any meaningful traction ahead of the US PCE Price Index.
- Fed rate cut bets, sliding US bond yields and a bearish USD continue to lend support.
- Concerns about the worsening economic conditions in China further act as a tailwind.
Gold price (XAU/USD) is seen oscillating in a narrow trading band during the Asian session on Thursday and consolidating its recent strong gains to its highest level since May 5, around the $2,052 area touched the previous day. Traders opt to move to the sidelines and await the release of the Personal Consumption Expenditures (PCE) data from the United States (USD), due later during the North American session. The core gauge – the Fed’s preferred measure of inflation – will be looked for confirmation that inflation is slowing and reaffirm expectation of a dovish pivot by the Federal Reserve (Fed).
Heading into the key data risk, growing acceptance that interest rates in the US have peaked and rising bets that the Fed will start easing its monetary policy by the first half of the year continues to lend support to the non-yielding Gold price. The CME group’s FedWatch tool indicates a more than 70% chance of a Fed rate cut move in May 2024, which leads to a further decline in the US Treasury bond yields. This, in turn, fails to assist the US Dollar (USD) to build on the overnight bounce from its lowest level since August 11, which, along with China’s economic woes, acts as a tailwind for the XAU/USD.
Daily Digest Market Movers: Gold price holds steady just below a multi-month top amid dovish Fed expectations
- The recent remarks from several Federal Reserve officials suggested that the central bank may be done raising interest rates and continue to act as a tailwind for the Gold price.
- Fed Governor Christopher Waller flagged a possible rate cut in the months ahead and Cleveland Fed President Loretta Mester saw clear progress in getting inflation to 2%.
- The markets are now pricing in a cumulative 100 bps of rate cuts by the Fed in 2024, which is reinforced by a further decline in the US Treasury bond yields.
- The yield on the benchmark 10-year US government bond, which breached 5% in October for the first time in 16 years, languishes near its lowest level since September 14.
- Furthermore, the yield on the rate-sensitive two-year US Treasury note is at its lowest since July and continues to undermine the US Dollar, lending support to the XAU/USD.
- The second estimate of the US GDP showed that the world’s largest economy grew by a 5.2% annualized pace during the third quarter as compared to the 4.9% reported previously.
- The upbeat US macro data did provide a modest lift to the USD on Wednesday, though dovish Fed expectations keep a lid on any meaningful recovery from a multi-month low.
- The latest data published by the National Bureau of Statistics (NBS) showed that China’s Manufacturing PMI ticked down to 49.4 in November from 49.5 in the prior month.
- The non-manufacturing PMI dropped to 50.2 in November from the 50.6 previous, fueling concerns about the worsening conditions in the world’s second-largest economy.
Technical Analysis: Gold price consolidates before the next leg up amid slightly overbought RSI on the daily chart
From a technical perspective, the Relative Strength Index (RSI) on the daily chart is holding above the 70 mark, pointing to slightly overbought conditions and holding back bulls from placing fresh bets. That said, any meaningful corrective slide is more likely to attract fresh buyers near the overnight swing low, around the $2,035 region. This is followed by support near the $2,020 area and the $2,010-$2,008 strong horizontal resistance breakpoint.
The latter should act as a strong base for the Gold price, which if broken decisively should pave the way for deeper losses. On the flip side, the multi-month peak, around the $2,052 area touched on Wednesday, now seems to act as an immediate hurdle for the Gold price. A sustained strength beyond should allow bulls to aim back towards challenging the all-time high, around the $2,079-2,080 zone set in May.
US Dollar price this month
The table below shows the percentage change of US Dollar (USD) against listed major currencies this month. US Dollar was the weakest against the New Zealand Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -3.70% | -4.52% | -2.20% | -4.78% | -2.86% | -6.41% | -4.24% | |
| EUR | 3.56% | -0.79% | 1.47% | -1.05% | 0.82% | -2.61% | -0.52% | |
| GBP | 4.33% | 0.78% | 2.24% | -0.26% | 1.59% | -1.81% | 0.28% | |
| CAD | 2.16% | -1.48% | -2.27% | -2.54% | -0.63% | -4.11% | -2.00% | |
| AUD | 4.57% | 1.04% | 0.26% | 2.46% | 1.83% | -1.54% | 0.53% | |
| JPY | 2.77% | -0.82% | -1.62% | 0.65% | -1.89% | -3.47% | -1.31% | |
| NZD | 6.02% | 2.55% | 1.77% | 3.97% | 1.52% | 3.34% | 2.05% | |
| CHF | 4.07% | 0.51% | -0.27% | 1.96% | -0.54% | 1.31% | -2.08% |
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).
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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