Gold steadily moves closer to multi-month top ahead of US ISM PMI and Fed’s Powell

Gold price attracts fresh buyers on Friday and draws support from dovish Fed expectations.
Growing concerns about a global economic downturn lend additional support to the metal.
The risk-on mood might cap gains ahead of the US ISM PMI and Fed Chair Powell’s speech.

Gold price (XAU/USD) sticks to its modest intraday gains through the early European session and has now reversed a major part of the previous day's losses. The precious metal remains well within the striking distance of its highest level since May 5 touched on Wednesday and currently trades around the $2,043-$2044 area, up nearly 0.40% for the day. Growing acceptance that the Federal Reserve (Fed) is done with its policy-tightening campaign and may start cutting rates as early as March 2024 turns out to be a key factor acting as a tailwind for the non-yielding yellow metal.

Dovish Fed expectations, meanwhile, fail to assist the US Dollar (USD) to capitalize on this week's goodish recovery from its lowest level since August 11. Subdued USD price action lends additional support to the Gold price amid China's economic woes and a darkening global outlook. That said, a generally positive tone around the European equity markets might cap gains for the safe-haven XAU/USD. Furthermore, a duo of Fed officials on Thursday pushed back against expectations for a quick pivot to rate cuts and might further hold back bulls from placing fresh bets.

Nevertheless, the Gold price remains on track to end in the green for the third successive week as trades now look to the US ISM Manufacturing PMI, due for release later during the early North American session, for a fresh impetus. The focus, however, will remain glued to Fed Chair Jerome Powell's speech, which might provide some cues about future interest rates and infuse some volatility in the markets. This, along with the USD price dynamics, should provide impetus to the XAU/USD and allow traders to grab short-term opportunities on the last day of the week.

Daily Digest Market Movers: Gold price builds on its steady intraday ascent amid Fed rate cut bets and subdued USD demand

Bets that the Federal Reserve will not hike rates again and may start easing its monetary policy by the first half of 2024 continue to lend some support to the non-yielding Gold price.
The CME group's FedWatch Tool indicates an even possibility that the Fed will cut policy rates as early as March 2024 and a near 80% chance of such a move at the May FOMC meeting.
The bets were reaffirmed by the key inflation data on Thursday, which showed that the Personal Consumption Expenditures (PCE) Price Index remained unchanged in October.
Over the 12 months, the PCE Price Index registered the smallest year-on-year increase since March 2021 and decelerated from 3.4% to 3.0% during the reported month.
Moreover, the gauge that strips out volatile food and energy prices rose by a modest 0.2% in October and saw an annual rise of 3.5%, further pointing to signs of easing inflation.
Another report showed that Jobless Claims rose to 218K last week and 1.93 million people were collecting unemployment benefits the week that ended November 18 – the most in two years.
New York Fed President John Williams said on Thursday that it will be appropriate to maintain a restrictive stance for quite some time to bring inflation back to the 2% target.
San Francisco Fed President Mary Daly noted that interest rates are in a very good place to control inflation, though she is not thinking about cuts and that it was too soon to say if hikes are finished.
Given the recent mixed signals, the market attention will remain glued to Fed Chair Jerome Powell's speech, which could infuse some volatility and provide a fresh impetus to the XAU/USD.
Traders will also confront the release of the US ISM Manufacturing PMI, which is expected to improve to 47.6 in November, though remains in contraction territory for the 12th straight month.

Technical Analysis: Gold price seems poised to appreciate further, move beyond multi-month top awaited

From a technical perspective, any subsequent move-up is likely to face some resistance near the $2,052 area, or a multi-month peak. With oscillators on the daily chart holding comfortably in the positive territory, some follow-through buying will be seen as a fresh trigger for bullish traders and allow the Gold price to accelerate the momentum further towards challenging the all-time high, around the $2,079-2,080 zone touched in May.

On the flip side, the overnight swing low, around the $2,030 area, could act as immediate support ahead of the $2,020 zone and the $2,010-$2,008 strong horizontal resistance breakpoint. The latter should act as a key pivotal point, which if broken might prompt some technical selling and drag the Gold price further below the $2,000 psychological mark, towards testing the next relevant support near the $1,990 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 Canadian Dollar.

	USD	EUR	GBP	CAD	AUD	JPY	NZD	CHF
USD		-0.07%	-0.04%	-0.10%	0.04%	0.06%	-0.07%	0.02%
EUR	0.07%		0.02%	-0.04%	0.10%	0.13%	0.00%	0.09%
GBP	0.03%	-0.03%		-0.07%	0.07%	0.11%	-0.03%	0.06%
CAD	0.10%	0.04%	0.07%		0.14%	0.17%	0.04%	0.14%
AUD	-0.04%	-0.10%	-0.07%	-0.13%		0.03%	-0.10%	-0.01%
JPY	-0.06%	-0.10%	-0.11%	-0.19%	0.01%		-0.12%	-0.04%
NZD	0.06%	-0.01%	0.02%	-0.04%	0.09%	0.13%		0.09%
CHF	-0.03%	-0.10%	-0.06%	-0.13%	0.01%	0.05%	-0.09%

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).

Fed FAQs

What does the Federal Reserve do, how does it impact the US Dollar?

Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money.
When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.

How often does the Fed hold monetary policy meetings?

The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions.
The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.

What is Quantitative Easing (QE) and how does it impact USD?

In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.

What is Quantitative Tightening (QT) and how does it impact the US Dollar?

Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.

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