Yesterday the price of gold (XAU/USD) remained above $2,060 and in the early Asian session on Wednesday, marking a quiet final week of 2023 with light trading volumes.
The US Dollar exhibits broad weakness against its counterparts, leading the US Dollar Index (DXY) to dip to its lowest level since July, reaching around 101.45. Concurrently, Treasury yields are slightly lower, with the 10-year yield at 3.89%.
Anticipation of Federal Reserve easing has heightened, as per the WIRP, reflecting a 15% probability of a cut on January 31 and full pricing for March 20, with six cuts expected by the end of 2024. Traders, however, remain attentive to upcoming data releases in the coming weeks. It’s noteworthy that lower interest rates tend to favor gold by reducing the opportunity cost of holding non-yield-bearing assets.
In the preceding week, the Core Personal Consumption Expenditures Price Index (Core PCE) for November reported a 0.1% month-on-month increase, below the market consensus of 0.2%. On an annual basis, Core PCE displayed the smallest rise since April 2021, registering at 3.2% year-on-year, down from 3.4% in October and below the market expectation of 3.3%.
Beyond economic indicators, geopolitical concerns persist. The threat from Yemen to the Red Sea raises worries about broader risks to shipping. Additionally, Iran’s statement about the potential closure of the Gibraltar Strait, though doubted by many, could influence the price of safe-haven assets like gold.
Looking ahead, gold traders will closely monitor developments in Middle East geopolitical tensions. Economic data releases, including the US Richmond Fed Manufacturing Index for December and Initial Jobless Claims on Wednesday and Thursday, respectively, will be of significance in guiding market sentiment.
While gold has experienced a halt in its three-day upward trend, hovering near $2,070 in the early hours of Wednesday. The US Dollar regains stability amid tepid US Treasury bond yields and a mixed market sentiment. The earlier FOMC meeting didn’t helped. The XAU/USD price has encountered a significant obstacle at $2,079, suggesting the possibility of a brief pullback.
From a technical perspective, there appears to be no notable shift in the trajectory of the Gold price, with the path of least resistance still pointing towards the upside.
The Gold price takes a momentary pause as the US Dollar (USD) stabilizes, influenced by a cautious market sentiment despite sluggish performance in US Treasury bond yields. Investors, returning to the market after the Christmas holiday, are catching up on their trades and staying abreast of the latest macroeconomic developments, refraining from making fresh directional bets at this time.
