Gold witnessed a downward movement for the second consecutive day, yet it managed to cling to its weekly gains as a mix of US economic data kept the hopes of a rate cut alive. Traders are on tenterhooks awaiting the Federal Reserve’s interest rate decision on December 18, with a 93% probability of a 25 basis points cut anticipated according to data from the Chicago Board of Trade.
The precious metal’s price dipped as high US Treasury bond yields took a toll. The XAU/USD is currently trading at $2,657, marking a 0.80% decline. However, despite these losses, gold is up nearly 1% for the week, following a series of US economic data releases. The consumer and producer inflation data in the US presented a mixed picture, but the latest Initial Jobless Claims report provided an indication to investors that a rate cut by the Fed in December was a plausible scenario.
The market’s attention is firmly fixed on the Fed’s monetary policy meeting on December 17 – 18. After the decision is announced, all eyes will be on Fed Chair Jerome Powell’s press conference, as investors seek insights into the policy path for 2025.
On Friday, second-tier economic data showed some movement. US Import Prices saw a marginal increase in November, while Export Prices experienced a dip. Moreover, the non-yielding gold extended its losses after US Secretary of State Antony Blinken’s statement regarding the possibility of a Gaza ceasefire.
Looking ahead to next week, the US economic calendar is packed with significant releases, including the S&P Global Flash PMIs, Retail Sales, Industrial Production, the Federal Open Market Committee policy decision, and the core Personal Consumption Expenditures Price Index.
Daily Digest of Market Movers:
Gold prices took a hit as US real yields climbed almost five basis points to 2.066%, up from 1.996%. Concurrently, the US 10-year Treasury bond yield rose by four-and-a-half basis points to 4.375%, adding to the pressure on gold.
The US Dollar Index remained steady at 107.05, with hardly any change. Import Prices for November inched up by 0.1% month-on-month, matching the October figure but surpassing the expected deceleration of -0.2%. Export Prices for the same period dropped from 1% to 0% month-on-month, though this was still above the estimated -0.2%.
As noted by sources cited by Reuters, “We have reached the time of year when convictions are low, and positions are being held on a short leash, meaning any price reversal – in both directions – will quickly be met with position-squaring.” Additionally, analysts at Goldman Sachs pointed out that China’s central bank “may even increase Gold demand during periods of local currency weakness to boost confidence in their currency.”
Technical Outlook:
Gold’s price has been in correction mode after reaching a two-month peak of $2,726 and has since slid towards the $2,650 region. It appears that the metal has found a fair value within the $2,600 – $2,700 range, close to the 50 and 100-day Simple Moving Averages at $2,670 and $2,597 respectively. A weekly close below the 50-day SMA could prompt sellers to push the price of gold lower. Key support levels are identified at $2,600, the 100-day SMA, and near the November 14 low of $2,536. On the upside, if buyers manage to reclaim $2,700, the next resistance would be the December 12 peak at $2,726, followed by the record high at $2,790. As the market navigates through these various influences, gold’s future price movements remain uncertain and closely tied to economic developments and the Fed’s actions.
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