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27 Dec 2023

Gold Price Forecast: XAU/USD holds above $2,060 amid the quiet session

  • The US Core PCE for November advanced 3.2% year-on-year, the smallest rise since April 2021.
  • The six rate cuts are fully priced in by the end of 2024, according to the WIRP.
  • The Middle East conflicts might boost safe-haven flows.

Gold price (XAU/USD) holds above $2,060 during the early Asian session on Wednesday. The last week of 2023 is likely to be quiet amid the light trading volume. At press time, the gold price is trading at $2,066, losing 0.09% on the day.

The US Dollar was broadly weaker against its rivals. Meanwhile, the US Dollar Index (DXY), a measure of the value of the USD against a weighted basket of currencies used by US trade partners, drops to its lowest level since July near 101.45. The Treasury yields edge lower, with the 10-year yield standing at 3.89%.

Fed easing expectations have intensified. According to the WIRP, the market has priced in 15% odds of a cut on January 31 and fully priced in March 20 with the six cuts fully priced in by end-2024. However, traders will take more cues from the data in the coming weeks. It’s worth noting that lower interest rates benefit the yellow metal as they decrease the opportunity cost of holding non

Last week, November’s Core Personal Consumption Expenditures Price Index (Core PCE) came in at 0.1% MoM, below the market consensus of 0.2%. On an annual basis, the Core PCE showed the smallest rise since April 2021, arriving at 3.2% YoY from 3.4% in October, worse than the market expectation of 3.3%.

Apart from this, Yemen continues to threaten the Red Sea, but there are also concerns about a wider threat to shipping. Iran said it could shut down the Gibraltar Strait, which is something that most people doubt. This, in turn, might lift the price of a safe-haven asset like gold.

Moving on, gold traders will keep an eye on the developments surrounding the geopolitical tension in the Middle East. The US Richmond Fed Manufacturing Index for December and the Initial Jobless Claims will be due on Wednesday and Thursday, respectively.

 

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