Gold Price Advances Further As Expectations Over Federal Reserve Rate Cut Bets Deepen

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Gold price rises sharply above $2,050 as the Fed’s rate cut expectations remain in the spotlight.

The US Dollar Index was battered by rate cut bets and downwardly revised US Q3 GDP data.

Investors await core PCE price index and Durable Goods Orders data for further action.

Gold price (XAU/USD) climbs swiftly above the crucial resistance of $2,050 as market participants are betting in favor of early interest rates unwinding by the Federal Reserve (Fed). The significant improvement in the Consumer Price Index (CPI) towards the 2% target has boosted hopes of early rate cuts by the Fed. Meanwhile, investors await the United States core Personal Consumption Expenditure (PCE) price index data for November. A soft underlying inflation report would strengthen confidence among investors about early rate cuts, while a report which showed that price pressures remain sticky would offer a temporary cushion to the US Dollar.
Daily Digest Market Movers: Gold price advances as US Dollar retreats

Gold price delivers a decisive break above the crucial resistance of $2,047 as the US Dollar came under pressure after a slight downgrade in the third quarter Gross Domestic Product (GDP) estimate on Thursday.

The US Bureau of Economic Analysis (BEA) downgraded the Q3 growth rate in its revised estimate to 4.9% against expectations of 5.2%, weighing heavily on the US Dollar.

A downwardly revised GDP indicates a cooling labor market and price pressures. Still, economic growth in the US is still higher in comparison with other Group of Seven economies.

In addition to that, deepening expectations for a soft US core PCE price index report for November has underpinned the Gold price against the US Dollar. The data will be published at 13:30 GMT.

The core PCE price index is expected to increase at a steady pace of 0.2% in November. The annual underlying inflation measure is seen softening to 3.3% against the prior release of 3.5%.

In the monetary policy statement of December, Fed policymakers projected that PCE inflation, their preferred inflation tool, would decelerate to 3.2% by the end of 2023.

A steeper-than-projected decline in the underlying inflation report would push back expectations of a longer restrictive policy stance and put the rate-cut factor into the spotlight.

Investors are pricing in that the Fed would announce its first rate cut in March after a year-long rate tightening spell. A second cut would come in May.

Expectations for lowering interest rates were boosted by commentary from Fed Chairman Jerome Powell, who talked about avoiding the mistake of keeping interest rates too high.

The majority of Fed policymakers are trying hard to push back expectations of rate cuts, emphasizing the idea of keeping interest rates in a restrictive trajectory until the achievement of price stability.

Fed policymakers are reiterating that strong resilience in the US economy could keep inflation fears persistent.

Apart from the US core PCE price index, investors will also focus on the US Durable Goods Orders for November. New orders for durable goods are seen increasing by 2.2% against a 5.4% decline in October. A more-than-projected increase in new orders would provide some cushion to the US Dollar.

Technical Analysis: Gold price prints a fresh two-week high above $2,050Gold price refreshes two-week high above $2,050 after recovering swiftly from $1,974. The precious metal is expected to continue its upside towards $2,070, supported by deepening rate cut expectations. A bullish momentum has been triggered as the Relative Strength Index (RSI) (14) has climbed above 60.00. More By This Author:EUR/GBP Loses Ground Near 0.8660 Following UK GDP Data WTI Advances Near $74.70 On Red Sea Disruptions, More Vessels To Avoid The Suez Canal Gold Price Forecast: XAU/USD Extends Its Upside Above $2,050, All Eye On US PCE Data