In the early Asian session on Friday, the price of gold (XAU/USD) hovered around $2,065, retracing from a peak of $2,088. The yellow metal faced headwinds from a strengthening US Dollar (USD) and rising US Treasury bond yields. The prevailing sentiment suggests that gold’s downside could be constrained amidst expectations of a Federal Reserve (Fed) rate cut in March 2024.
The US Dollar Index (DXY), reflecting the USD against a weighted basket of currencies, rebounded from its lowest point since July, reaching 101.20 from 100.85. Simultaneously, the 10-year Treasury yields rose to 3.85%, contributing to the pressure on gold.
November saw the core PCE Price Index, the Federal Reserve’s preferred inflation indicator, slowing to a 3.2% annual increase. Despite the United States experiencing robust economic growth and unemployment nearing historic lows, investor sentiment leans toward the belief that the Fed’s rate hike cycle is complete, with expectations of an interest rate cut as early as March 2024.
On Thursday, Initial Jobless Claims in the United States exceeded market expectations, reaching 218,000 for the week ending December 23, against a forecast of 210,000. Continuing Claims rose to 1.875 million, marking a four-week high. In addition, Pending Home Sales in November remained stagnant, falling short of the anticipated 1% gain.
Gold traders are closely monitoring the Chicago Purchasing Managers’ Index for December, set to be released on Friday. However, market participants may be subdued as they enter holiday mode, transitioning into the new year in 2024.
