Gold Prices Rebound on Weaker US Dollar and Declining Treasury Yields
- XAU/USD gains over 0.13% on Wednesday, rebounding from a weekly low of $2,605 due to a weaker US Dollar and declining US Treasury yields.
- US economic data show strength with the second GDP estimate for Q3 and strong labor market data.
- The core Personal Consumption Expenditures (PCE) Price Index aligns with expectations yet continues to rise.
Gold prices have seen a recovery on Wednesday after hitting a weekly low of $2,605, driven by a soft US Dollar in response to the release of US economic data. The decline in US Treasury bond yields has also played a role in boosting Gold’s rebound to its current price of $2,636, reflecting a gain of 0.13%.
Key Market Factors
- Market sentiment turned slightly negative as US equity markets geared up for Thanksgiving, impacting the overall mood.
- The Federal Reserve’s preferred inflation gauge, the core Personal Consumption Expenditures (PCE) Price Index, supports the Fed’s gradual approach and potential interest rate cuts at the upcoming December meeting.
- The US economy remains robust, as indicated by the second estimate of Q3 GDP growth and strong labor market data showing a decrease in unemployment benefit claims.
- US Treasury bond yields fell following the data release, leading to a decline in the US Dollar Index (DXY) by 0.78% to 106.04.
Market Movers Impacting Gold Prices
- Gold prices rebounded as US real yields dropped by six basis points to 1.966%.
- US Durable Goods Orders for October rose by 0.2% month-on-month, slightly below the forecast but an improvement from September’s decline.
- The second estimate of US GDP growth for Q3 met expectations at 2.8% quarter-on-quarter, slightly lower than the previous quarter’s 3% growth.
- Initial Jobless Claims for the week ending November 23 remained steady below estimates at 213K.
- The core PCE increased by 2.8% year-on-year in October, in line with expectations.
- Investors estimate 24 bps of Fed easing by the end of 2024 based on data from the Chicago Board of Trade.
Technical Analysis: Gold Price Outlook
Gold’s price currently shows a neutral to downward bias, with sellers pushing below the $2,700 mark. Despite a modest increase on Wednesday, the XAU/USD is forming lower highs and lower lows. If bulls reclaim the 50-day SMA at $2,667, it could lead to a challenge of key levels at $2,700, $2,750, and the all-time high at $2,790.
If bears drive prices below $2,600, it may trigger a test of the 100-day SMA at $2,568, followed by the November 14 swing low of $2,536. Oscillators like the Relative Strength Index (RSI) indicate a bearish trend, suggesting selling pressure.
Economic Indicator Insights: Core Personal Consumption Expenditures – Price Index (MoM)
The Core Personal Consumption Expenditures (PCE) is a key economic indicator released by the US Bureau of Economic Analysis that measures changes in the prices of goods and services purchased by consumers in the US. The PCE Price Index is the Fed’s preferred inflation gauge, comparing prices on a monthly basis to assess inflation trends.
The core reading excludes volatile food and energy components for a more accurate inflation measurement. A high reading is bullish for the US Dollar, while a low reading is bearish. Understanding this indicator provides insights into consumer spending and inflation dynamics, influencing monetary policy decisions.