After experiencing a slide of more than 0.70% on Wednesday and a subsequent 0.35% rise on Thursday, the gold price (XAU/USD) has shown signs of recovery. The Asian Pacific session sees XAU/USD trading at $2020.40, virtually unchanged.
The stabilization in gold prices follows a mix of US economic data. In the fourth quarter of the previous year, the US economy displayed growth of 3.3% on a quarterly basis, surpassing analyst estimates of 2%. Although this figure trailed the third quarter’s performance, the entire year’s Gross Domestic Product (GDP) for 2023 rose by 2.5%, a 1.9% increase compared to 2022.
Other economic indicators presented a mixed picture, with Durable Goods Orders in December unexpectedly remaining at 0%, falling short of the forecasted 1.1% increase and trailing the previous month’s 5.5% reading. Simultaneously, Initial Jobless Claims for the latest week increased from 189K to 214K, surpassing expectations.
Market caution persists regarding the pricing of the first Federal Reserve rate cut in March, with probabilities dropping below 50%. Investors are anticipating the first cut in May, with projections for a total of six cuts, bringing the Federal funds rate (FFR) to 4%, down from the current range of 5.25%-5.50%.
Gold’s performance benefited from falling US Treasury yields, spurred by the European Central Bank’s decision to maintain rates, prompting a rally in the bond market amid speculation about rate cuts. Additionally, geopolitical tensions in the Middle East, following an attack on two US-flagged Maersk ships by Houthis, contributed to the recovery in gold prices.
Gold traders are now awaiting the release of the Personal Consumption Expenditures (PCE) Price Index for December, a key inflation gauge for the Federal Reserve, ahead of the upcoming monetary policy decision by Fed Chairman Jerome Powell and the Board.
