Gold falls below 2040, but US PCE data may help gold prices rebound
Gold prices fell slightly below $2,040 on Wednesday (December 20), ahead of the release of the U.S. core personal consumption expenditures price index (PCE) data for November.
As of press time, spot gold is currently trading at $2,035.23 per ounce, down 0.25% on the day.
(Spot gold 30-minute trend chart source: Yihuitong Finance)
Gold prices remained within the trading range established over the past week as markets continued to bet that the Federal Reserve would cut interest rates early in 2024.
Expectations for a March rate cut remain despite warnings from Fed officials
Some Fed officials have warned that bets on an early rate cut are overblown, but that hasn’t stopped expectations that the Fed could begin cutting rates as early as March 2024.
Fed funds futures showed traders saw a 67.5% chance of a 25 basis point rate cut in March, up from 62.7% the previous day. That comes despite warnings from some Fed officials that there remains uncertainty over the timing of a rate hike amid high U.S. inflation.
The resilience of the U.S. economy may also give the Fed more room to keep interest rates higher for longer.
Still, gold will benefit from a lower interest rate environment, given that higher interest rates drive up the opportunity cost of investing in gold.
But rising risk appetite could curb gold’s gains, especially if the U.S. economy shows more signs of a soft landing. The situation is also expected to weaken safe-haven demand for gold.
This week, investors will focus on November core PCE price index data due to be released on Friday.
According to consensus, the monthly core PCE data is expected to grow at a steady rate of 0.2%. On an annual basis, the Fed’s preferred inflation tool is expected to fall to 3.3% from 3.5% previously.
In addition to the Fed’s preferred inflation measure, investors will also focus on U.S. durable goods orders data for November. Investors expect core commodity demand to rise 2.2% after falling 5.4% in October.
At the same time, geopolitical tensions between Israel and Palestine have begun again, which should inject some strength into gold prices. The United Nations Security Council is negotiating a ceasefire in Gaza to provide humanitarian aid to civilians.
Everyone seems to be saying gold prices will continue to rise in 2024, writes BullionVault’s Adrian Ash.
The conventional wisdom is that gold prices will extend this year’s all-time highs in 2024 as Western central banks begin to cut interest rates, emerging market central banks continue to buy record amounts of gold, and geopolitical tensions erupt into, if not outright conflict between, the major powers. .
2023-12-20 14:25:00
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