- Gold price consolidates near the weekly top amid a modest USD uptick and the risk-on mood.
- The fundamental backdrop favours bullish traders and supports prospects for additional gains.
- The US Consumer Confidence Index is eyed for some impetus ahead of the US PCE Price Index.
Gold price (XAU/USD) struggles to capitalize on its weekly gains registered over the past two days and oscillates in a narrow trading band through the first half of the European session on Wednesday. The US Dollar (USD) attracts some buying and reverses a part of the previous day's losses amid the uncertainty over the timing of when the Federal Reserve (Fed) will begin easing its monetary policy. This, along with the prevalent risk-on environment, is seen as another factor acting as a headwind for the safe-haven precious metal.
The downside for the Gold price, however, seems limited in the wake of rising bets for an imminent shift in the Fed's policy stance. In fact, the markets are now pricing in a greater chance of an interest rate cut as early as March 2024 and a cumulative of 140 bps rate cuts through the end of next year. This keeps the US Treasury bond yields depressed near a multi-month low. Apart from this, concerns about geopolitical risks linked to the conflict in the Middle East suggest that the path of least resistance for the non-yielding yellow metal is to the upside.
Traders, however, seem reluctant to place aggressive directional bets and opt to wait on the sidelines ahead of the release of the Fed's preferred inflation gauge – the US Core Personal Consumption Expenditure (PCE) Price Index on Friday. The key US inflation reading should influence the Fed's future policy decisions and drive the USD, providing a fresh impetus to the Gold price. In the meantime, the Conference Board's Consumer Confidence Index, along with Chicago Fed President Austan Goolsbee's appearance, might produce short-term trading opportunities on Wednesday.
Daily Digest Market Movers: Gold price bulls take a pause ahead of the US PCE Price Index on Friday
- Growing acceptance that the Federal Reserve (Fed) will pivot away from its hawkish stance early next year continues to act as a tailwind for the Gold price.
- Chicago Fed President Austan Goolsbee said the central bank is not pre-committing to cutting interest rates soon and should not be bullied by what the market wants.
- Cleveland Fed President Loretta Mester noted on Monday that financial markets had got a little bit ahead of the central bank on when to expect interest rate cuts next year.
- The markets, however, have priced in a more than 60% chance that the Fed will cut rates as soon as March 2024 and a total of 140 basis points of rate reductions in 2024.
- The yield on the benchmark 10-year US government bond languishes below the 4% mark, with the US Dollar hovering just above a multi-month low touched last week.
- The global risk-on rally remains uninterrupted amid expectations of lower interest rates in the US, more stimulus from China and dovish Bank of Japan, capping the safe-haven metal.
- Traders now look to the US Consumer Confidence Index for some impetus later this Wednesday, though the focus remains on the release of the US PCE Price Index on Friday.
Technical Analysis: Gold price extends its consolidative price move near the weekly top
From a technical perspective, some follow-through buying beyond the $2,047-2,048 region will be seen as a fresh trigger for bulls and set the stage for an extension of the post-FOMC rally from the 50-day Simple Moving Average (SMA). The Gold price might then accelerate the positive move towards the $2,072-2,073 intermediate resistance before aiming to reclaim the $2,100 round figure.
On the flip side, the $2,018-2,017 area now seems to have emerged as an immediate strong support, below which the Gold price could slide to the $2,000 psychological mark. A convincing break below the latter might prompt some technical selling and expose the 50-day SMA, currently pegged near the $1,989-1,988 zone. The subsequent downfall has the potential to drag the XAU/USD towards last week's swing low, around the $1,973 region, en route to the 200-day SMA, currently near the $1,957 zone.
US Dollar price this week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.58% | -0.33% | -0.22% | -0.96% | 0.99% | -1.02% | -1.08% | |
| EUR | 0.58% | 0.26% | 0.36% | -0.38% | 1.56% | -0.44% | -0.50% | |
| GBP | 0.33% | -0.25% | 0.10% | -0.63% | 1.31% | -0.69% | -0.75% | |
| CAD | 0.22% | -0.37% | -0.11% | -0.74% | 1.20% | -0.81% | -0.87% | |
| AUD | 0.95% | 0.38% | 0.63% | 0.75% | 1.93% | -0.06% | -0.11% | |
| JPY | -0.99% | -1.60% | -1.31% | -1.21% | -1.98% | -2.02% | -2.08% | |
| NZD | 1.02% | 0.44% | 0.69% | 0.80% | 0.07% | 2.00% | -0.05% | |
| CHF | 1.07% | 0.49% | 0.75% | 0.86% | 0.11% | 2.04% | 0.06% |
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 (MoM)
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 MoM figure compares the prices of goods in the reference month to the previous month.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.
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