Gold trades steady as markets brace for delayed US PCE data
- Gold holds modest gains on Friday as traders await the delayed US PCE inflation report.
- Dovish Fed expectations and persistent geopolitical tensions continue to offer a supportive backdrop for Gold.
- Technically, XAU/USD needs a break above 4,250 to regain bullish traction, while 4,160-4,170 remains key near-term support.
Gold (XAU/USD) trades marginally higher on Friday, oscillating within the familiar range that has defined price action this week, as dovish Federal Reserve (Fed) expectations keep the precious metal broadly supported.
At the time of writing, XAU/USD is hovering near $4,222, with investors turning their focus to the delayed US Personal Consumption Expenditures (PCE) inflation data due later in the day.
Markets will closely parse the PCE release as the final checkpoint ahead of next week’s Fed interest rate decision. Recent labour indicators have delivered mixed signals but have done little to shift expectations, with investors still largely convinced that the Fed is on track to deliver another interest rate cut.
In addition to PCE, the US docket includes Personal Income, Personal Spending and the preliminary University of Michigan consumer sentiment survey, accompanied by updates on 1-year and 5-year inflation expectations. Together, these releases will shape expectations for the Fed’s monetary policy path and could influence Gold’s near-term direction.
Market movers: Fed outlook and Russia-Ukraine peace talks in focus
- A steady US Dollar (USD) and firmer US Treasury yields are limiting the metals’ upside for now. The US Dollar Index (DXY) is trading around 99.00 after recovering from an intraday dip, while the benchmark 10-year yield sits near 4.108%, close to a two-week high, keeping Gold’s gains in check despite a broadly supportive Fed outlook.
- Recent US labour data show ADP Employment Change falling by 32,000 in November, sharply missing expectations for a 5,000 increase after a revised 47,000 gain in October. Challenger Job Cuts dropped to 71.3K from 153.1K, while Initial Jobless Claims declined to 191K, beating expectations for 220K and down from 218K last week.
- These labour indicators are among the few data points the Fed has ahead of its policy decision. October and November Nonfarm Payrolls will be released together on December 16, which comes after the meeting. The next key update before the decision will be next week’s JOLTS Job Openings report.
- According to the CME FedWatch Tool, markets assign about an 87% probability of a 25 basis point (bps) rate cut at the December 9-10 monetary policy meeting.
- Elsewhere, geopolitical tensions remain in focus as Russia-Ukraine peace efforts show little progress. The Kremlin described recent talks with US envoys as “encouraging,” yet key territorial disagreements persist, keeping uncertainty elevated and offering a layer of support for safe-haven assets such as Gold.
Technical analysis: XAU/USD needs a break above $4,250 to regain traction
XAU/USD continues to trade sideways after breaking out of a symmetrical triangle pattern, with a lack of follow-through buying keeping upside attempts capped near $4,250.
On the 4-hour chart, XAU/USD is hovering around the 21-period Simple Moving Average (SMA), reflecting a neutral short-term bias. However, the broader uptrend remains intact and any dips are still likely to attract buyers.
On the upside, a clear break above $4,250 is needed to revive bullish momentum, opening the door toward $4,300 and potentially a retest of the all-time high near $4,381.
On the downside, support is seen at the lower edge of the recent consolidation zone around $4,160-4,170, followed by the 100-period SMA near $4,141.
Momentum indicators paint a neutral-to-bullish picture. The Moving Average Convergence Divergence (MACD) histogram is narrowing toward the zero line while remaining slightly negative, indicating fading bearish pressure as the MACD line holds just below the signal line near the midpoint. The Relative Strength Index (RSI) around 58 signals steady momentum without strong directional conviction.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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