Gold price consolidates near three-week top, awaits US PCE Price Index before the next leg up

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• 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) struggles to capitalize on its intraday uptick to a near three-week high and trades just below the $2,050 level heading into the European session on Friday. The US Dollar (USD) gains some positive traction and recovers a part of the previous day’s decline to a near five-month low, which, in turn, is seen as a key factor acting as a tailwind for the commodity. The USD uptick, meanwhile, could be solely attributed to some repositioning trade ahead of the key US inflation figures and is likely to remain capped on the back of expectations that the Federal Reserve (Fed) will pivot away from its hawkish stance. 

Investors, however, remain uncertain about the timing of when the US central bank will start cutting interest rates in 2024. Hence, the focus will remain glued to the release of the US Core Personal Consumption Expenditure (PCE) Price Index, which will influence the Fed’s future policy decision and provide a fresh directional impetus to the non-yielding Gold price. The fundamental backdrop, meanwhile, seems tilted in favour of bulls and suggests that teh path of least resistance for the precious metal is to the upside. Nevertheless, the XAU/USD seems poised to register gains for the second successive week.

Daily Digest Market Movers: Gold price takes a brief pause ahead of the US PCE Price Index

• 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 have the upper hand, short-term trading range breakout in play

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.