Gold price (XAU/USD) remains steady above $2,060 in the early Asian session on Wednesday. As the last week of 2023 approaches, trading volume is expected to be light, creating a quiet market environment. At present, the gold price is trading at $2,066, experiencing a slight 0.09% decrease for the day.
The US Dollar has shown weakness against its counterparts, causing the US Dollar Index (DXY) to drop to its lowest level since July, near 101.45. Concurrently, Treasury yields have also declined, with the 10-year yield standing at 3.89%.
Expectations for Federal Reserve easing have heightened, as evidenced by the market pricing in a 15% chance of a rate cut on January 31 and a full expectation for a cut by March 20. The market has also fully priced in six rate cuts by the end of 2024. However, traders will closely monitor upcoming economic data for further guidance. Notably, lower interest rates are beneficial for gold as they reduce the opportunity cost of holding non-interest-bearing assets.
In the previous week, November’s Core Personal Consumption Expenditures Price Index (Core PCE) underperformed market expectations, registering a 0.1% MoM increase, below the consensus of 0.2%. On an annual basis, the Core PCE demonstrated the smallest rise since April 2021, reaching 3.2% YoY, down from 3.4% in October and below the market’s projection of 3.3%.
The ongoing tensions in the Middle East, particularly within the Red Sea and the threat to shipping, are contributing to potential safe-haven flows into assets such as gold. There are also concerns regarding the potential impact of Iran shutting down the Gibraltar Strait, although this possibility is met with skepticism by many.
Looking ahead, gold traders will closely monitor developments related to geopolitical tensions in the Middle East. Additionally, the release of the US Richmond Fed Manufacturing Index for December and the Initial Jobless Claims on Wednesday and Thursday, respectively, will provide further insights into the economic landscape. These data points can influence gold price movements and market sentiment in the coming days.
