Technically, the price of gold (XAU/USD) attempted to rebound towards the psychological resistance level of $2000 per ounce once again, but the strength of the US dollar prevented it, causing the price of gold to stabilize downward around the $1978 level per ounce at the time of writing. The gold market, like other financial markets, was affected after a better-than-expected reading of US inflation. Recently, the price of the yellow metal had dropped since reaching a record level earlier this month. However, with a consistent decline in the US Consumer Price Index (CPI), investors feel optimistic as this could lead to easing monetary policy conditions, which would be a boon for gold.
Recently, the price of the yellow metal has fallen since it reached a record high earlier this month, but with the US Consumer Price Index (CPI) falling steadily, investors are cheered as this could lead to easing monetary policy conditions, which would be a boon for gold.
In general, gold prices have fallen by more than 2% in the past week, but they are still up by more than 9% since the beginning of the year. Silver prices, the sister commodity to gold, have also risen above $23 per ounce. Also, Silver prices had been fallen by 7% in the past week and are also down by 4% since the beginning of the year.
Economically, according to the Bureau of Labor Statistics (BLS), the US annual inflation rate dropped to 3.1% in November, down from 3.2% in October, matching consensus estimates. On a monthly basis, the Consumer Price Index (CPI) rose higher than expected at 0.1%. Core inflation, which excludes volatile energy and food components, remained unchanged at 4% on an annual basis. Finally, the Core Consumer Price Index rose by 0.3%, compared to 0.2% in October.
Therefore, the next inflation reading will be the Producer Price Index (PPI). As, the Producer prices and the core Producer Price Index are expected to remain steady. Overall, financial markets were mostly mixed due to the data as investors prepared for the Federal Open Market Committee (FOMC) policy meeting on Wednesday. Mostly, traders are expecting a temporary pause in US interest rates, with the possibility of the Federal Reserve cutting interest rates early next year.
Moreover, a recent survey conducted by the Federal Reserve for CNBC showed that the majority of economists, analysts, and strategists expect the Federal Reserve to cut interest rates in June. Additionally, the chances of a soft landing are 47%, and the likelihood of a recession in the next 12 months has decreased to 41%. Commenting on the anticipated event, John Rainding, Chief Economist at Brain Capital, wrote: "The Federal Reserve needs to start mapping out interest rate cuts that may represent a more stringent policy because cuts will lag behind inflation declines and real interest rates will rise."
US Treasury bond yields were mixed, with the 10-year bond yield remaining steady at 4.235%. The 2-year bond yield did not change at 4.727%, while the 30-year bond yields increased by one basis point to 4.34%. As is known, gold is sensitive to interest rate movements because it affects the opportunity cost of holding non-yielding bullion.
For other metal commodity prices, copper futures remained steady at $3.775 per pound. Platinum futures did not change at $916.20 per ounce, while palladium futures rose to $969.00 per ounce.
Gold Price Forecast and Analysis Today:
The continued strength of the US dollar will remain a negative pressure on the gold price (XAU/USD). Moreover, the stability below the support level of $1985 per ounce will increase the bears’ control over the trend. According to the performance on the daily time frame chart below, the downward shift in the price of gold will strengthen if it moves towards the support levels of 1963 and 1945 dollars, respectively. At the same time, it is sufficient to push the technical indicators towards strong saturation levels for selling. From the last level, the purchase would be ideal. Thus, this will depend on the continued strength of the US dollar and the US Central Bank’s signals towards further tightening. On the other hand, over the same time period, the return of the gold price towards the psychological resistance level of $2,000 per ounce will confirm that the bulls are determined to return the price of gold to its record levels.
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