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- The price of gold (XAU/USD) climbed 0.40% amid a decrease in the US Dollar Index and a drop in the 10-year Treasury yield.
- Fed Chair Jerome Powell hinted at policy easing in 2023, leading to expectations of over 135 basis points in rate cuts by December 2024, according to CBOT futures.
- Upcoming US economic data, including Q3 GDP and core PCE, will provide further cues for the trajectory of gold, amid ongoing stability in the housing market.
Gold prices advanced steadily in the mid-North American session on Tuesday as the US Dollar and Treasury yields slumped, with market participants continuing to price in the likelihood of the US Federal Reserve (Fed) lowering borrowing costs next year. At the time of writing, XAU/USD trades at $2045 after hitting a daily low of $2021.84, reflecting a gain of 0.90%.
XAU/USD soars amid speculation of Federal Reserve’s policy shift
The US Dollar Index (DXY), which tracks the currency’s performance against six rivals, is down 0.40% at 102.09, while the US 10-year benchmark note rate is at 3.913% at around the last four days’ lows.
Last week’s Fed Chair Jerome Powell commented that the tightening cycle has ended and opened the door to ease policy next year, with discussions about rate cuts already underway. Nevertheless, last Friday, the New York Fed President John Williams pushed back and stated that the question is whether monetary policy is sufficiently restrictive or not.
Despite that, money market futures had priced in more than 135 basis points of rate cuts for December of 2024, according to fed funds futures contracts of the Chicago Board of Trade (CBOT). Odds for a rate cut in March lie at 70%.
Sources cited by Reuters said, “Investors are buying gold, and there is less incentive for people to get rid of it since the belief is that the Federal Reserve may very well cut interest rates before they achieve their 2% inflation target.”
Data-wise, US housing data revealed earlier was solid but failed to move the needle in favor of the Greenback (USD). In the week ahead, the US economic calendar will get busy with the release of Q3’s GDP final data, followed by Durable Goods Orders, the Fed’s preferred gauge for inflation, the core PCE, and additional housing data.
XAU/USD Price Analysis: Technical outlook
From a technical standpoint, the daily chart suggests the XAU/USD uptrend would continue, though it would need to reclaim the $2050 to pave the way to retest the previous year-to-date (YTD) high of $2081.82 before challenging $2100. On the flip side, if the non-yielding metal stays below $2050, that would pave the way for consolidation in the $2009-$2050 area. A breach of the bottom of that range could put the $2000 figure into play.
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