• The price of gold has difficulty gaining significant traction prior to the US PCE Price Index.
  • A bearish USD, Fed rate reduction wagers, and falling US bond yields all continue to provide support.
  • Concerns regarding the deteriorating economic situation in China provide an additional impetus.

During Thursday’s Asian session, the gold price (XAU/USD) was observed to oscillate within a narrow trading band while consolidating recent strong gains to reach its highest level since May 5, near the $2,052 region that was reached the day before. In anticipation of the publication of Personal Consumption Expenditures (PCE) data from the United States (USD), which is scheduled for later in the North American session, traders choose to remain on the sidelines. The core gauge, which is the preferred inflation measure of the Federal Reserve, will be examined to confirm the deceleration of inflation and reassert anticipations regarding a dovish pivot by the Fed.

Increasing consensus that interest rates in the United States have reached their zenith and escalating wagers that the Federal Reserve will begin easing monetary policy in the first half of the year continue to bolster the non-yielding gold price as we approach the key data risk. FedWatch, an instrument of the CME group, assigns a probability of over 70% that the Federal Reserve will reduce interest rates in May 2024, resulting in an additional decline in US Treasury bond yields. Consequently, this hinders the US Dollar’s (USD) ability to build upon its overnight recovery from its lowest point since August 11. This rally, coupled with the economic challenges faced by China, provides a tailwind for the XAU/USD.

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The Relative Strength Index (RSI) on the daily chart is currently positioned above the 70 threshold, indicating marginally overbought conditions that are impeding bulls from initiating new wagers. However, any significant corrective decline is more likely to draw in new investors in the vicinity of the overnight swing low, around $2,035 USD. This is followed by support near $2,020 and a strong horizontal resistance juncture between $2,010 and $2,008.

The latter level ought to serve as a solid foundation for the price of gold, and a decisive breach therefrom should result in more severe declines. Conversely, the multi-month high, which was reached on Wednesday near $2,052, appears to be an immediate obstacle for the price of gold. A sustained advance should enable bulls to refocus their efforts on challenging the all-time high, which was established in May between $2,079 and $2,080.

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