- Summary:
- With the US economy sending mixed signals, we discuss what this means for gold price with eyes on the year's final Fed interest rate decision.
Gold prices rose for the second successive session on Wednesday as traders anticipated Fed Interest rate cut. The yellow metal traded at $2,655 at the spot market , up marginally by $0.4 percent at the time of writing. Fed Chairman, Jerome Powell is scheduled to speak later on Wednesday, and traders expect a dovish tone from him.
US inflation rate is still above the Fed’s target of 2%, but traders expect FOMC members to slash interest rates in consideration of the wider macroeconomic pressures. In the latest such instance, private NonFarm Payrolls jobs rose by 146k in November, missing the forecast target of 166k.
Meanwhile, both the S&P Global Manufacturing PMI and the ISM Non-Manufacturing PMI readings fell short of the forecast figures. The former came in at 46.1 percent versus the projected 47 percent, while the latter was at 52.1 percent against the forecast 55.5 percent. A reading below 50 percent denotes contraction.
Gold price upside is also supported by falling US treasury bond yields. Returns on benchmark 10-year bonds stood at 4.201 at the time of writing, down by 22 basis points. XAUUSD has been range-bound in the $2,600s territory for the last week, but Powell’s confirmation of a likely 25 basis points cut by the Fed could provide a pathway out of the deadlock.
However, the continued absence by China’s central bank from the gold market has added downward pressure to gold. The world’s second-largest economy kept off the gold market for the sixth successive month in November.
Also, the calming of tensions in the Middle East has taken out gold’s safe haven muscle. Looking ahead, traders will weigh Jerome Powell’s Wednesday’s speech against the November US NonFarm Payrolls data, scheduled for release on Friday.
Gold price prediction
Gold price pivots at $2,647, and the upside will prevail if action stays above that level. The first resistance is likely to be at $2,660. However, extended bullishness could break above that level and test $2,670.
Alternatively, moving below $2,647 will denote the onset of bearish momentum. That could see the first support established at $2,637. However, a stronger downside momentum could break below that level. If that happens, the upside narrative will be invalid, and instead the decline could extend to test $2,628.
