Gold Price Analysis: Navigating Market Dynamics with Fed Rate Cut Expectations
Arslan Butt•Friday, December 29, 2023•2 min read
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During the early Asian session on Friday, GOLD (XAU/USD) experienced a subtle retraction from its recent high of $2,088, stabilizing around $2,065. This shift in momentum was influenced by a rebound in the US Dollar (USD) and a rise in US Treasury bond yields, key factors that often weigh on the precious metal. However, the downside for gold seems limited, largely due to the market’s anticipation of a potential rate cut by the Federal Reserve (Fed) in March 2024.
US Dollar and Treasury Yields Impact
The US Dollar Index (DXY), which measures the USD’s strength against a basket of major trade partner currencies, witnessed a recovery from its lowest level since July, climbing from 100.85 to 101.20.
Concurrently, the 10-year Treasury yields edged higher, stabilizing at around 3.85%, adding a layer of complexity to gold’s price movements.
Inflation Measures and Economic Health
Recent economic data released in the United States painted a mixed picture. The core Personal Consumption Expenditures (PCE) Price Index, the Fed’s favored inflation gauge, showed a cooling trend with a rise of 3.2% annually in November.
This data, coupled with the robust expansion of the US economy and near-historic low unemployment levels, fuels the belief that the Fed might have reached the end of its rate-hiking cycle and could consider a rate reduction in the near future.
Job Market and Housing Data
Thursday’s data revealed a rise in Initial Jobless Claims in the United States to 218,000 for the week ending December 23, surpassing the forecast of 210,000. The Continuing Claims also peaked at 1.875 million, the highest in four weeks, indicating some shifts in the job market. Additionally, Pending Home Sales remained flat in November, not meeting the expected 1% gain.
Anticipation for Chicago PMI
GOLD traders are now turning their attention to the upcoming Chicago Purchasing Managers’ Index (PMI) for December. This economic indicator, although significant, might not trigger substantial market action as traders are likely entering holiday mode, winding down activities as 2024 approaches.
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Gold’s Technical Outlook
From a technical standpoint, gold’s price action suggests a potential test of the key support level at $2,065.70. Should this level hold, it might pave the way for a rebound. The overall bullish trend for gold remains intact, supported by the 50-day Exponential Moving Average (EMA50).
The immediate target for gold is set at $2,100.00, provided the key support level remains unbreached.
The expected trading range for gold today is between the support at $2,070.00 and the resistance at $2,105.00.
The predominant trend for the day is anticipated to be bullish, aligning with the broader market expectations and technical indicators.
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Arslan Butt
Index & Commodity Analyst
Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics.His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker.His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.
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