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Gold Prices Edge Higher Amid Monetary Policy Speculations and Global Economic Signals

During Friday’s Asian session, the GOLD price (XAU/USD) experienced renewed buying interest at lower levels, reversing a significant portion of its previous day’s decline. Currently, the metal is trading around the $2,040 mark, marking an over 0.15% rise for the day and approaching its highest point since May 5, recorded earlier this Wednesday.

Thursday’s data from the United States indicated a continued moderation in inflation for October and a deceleration in the labor market, reinforcing the perception that the Federal Reserve (Fed) may have concluded its interest rate hikes. This less aggressive outlook is proving to be advantageous for the non-yielding gold.

In contrast, statements from two Federal Reserve officials challenging the anticipation of immediate rate reductions and suggesting the possibility of further policy tightening if inflation does not abate, have not significantly dampened the expectations of a near-term change in Fed’s policy approach. This has kept the US Dollar’s (USD) recent recovery, from its lowest point since August 11, in check.

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Additionally, the uncertain strength of China’s economy and a gloomy global economic forecast are supporting gold’s status as a safe haven. However, the recent surge in US equity markets might limit the gains for XAU/USD, particularly ahead of Fed Chair Jerome Powell’s upcoming speech.

The growing belief that the Federal Reserve may refrain from further rate hikes and could commence easing its monetary policy by early to mid-2024 is providing underlying support to the non-yielding gold. The CME Group’s FedWatch Tool suggests a balanced probability of a Fed rate cut as early as March 2024, with an approximately 80% likelihood of such action at the May FOMC meeting.

This expectation is bolstered by Thursday’s key inflation data, which revealed the Personal Consumption Expenditures (PCE) Price Index remained steady in October.

The PCE Price Index showed the smallest year-on-year rise since March 2021, slowing down from 3.4% to 3.0% in the reported month. Furthermore, the core measure, excluding food and energy, climbed by a modest 0.2% in October and recorded a 3.5% annual increase, signaling easing inflation. Another report indicated an increase in Jobless Claims to 218K last week, with 1.93 million people receiving unemployment benefits as of November 18 – the highest figure in two years.

Comments from New York Fed President John Williams and San Francisco Fed President Mary Daly suggest a sustained restrictive monetary stance to achieve the 2% inflation target, with the future of rate hikes remaining uncertain. Amid these mixed signals, the market’s focus is keenly set on Fed Chair Jerome Powell’s speech for potential volatility and direction for XAU/USD.

Additionally, the impending US ISM Manufacturing PMI release, expected to show a slight improvement yet still reflecting a contraction, will be closely monitored by traders.

Gold Technical Outlook

GOLD price trading has been range-bound since yesterday, with the stochastic oscillator now showing positive overlap, potentially spurring the price to resume its primary bullish trend targeting the 2075.25 area. This bullish trend is supported by the continuation of the bullish channels, enhancing the likelihood of further gains in the upcoming sessions.

However, a break below the 2029.00 level could lead to a decline towards 2009.30 as an initial test before any new rise.

Today’s expected trading range is between the 2025.00 support and the 2060.00 resistance, with the trend anticipated to be bullish.

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Arslan Butt
Index & Commodity Analyst
Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics.His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker.His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.
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