Gold futures (XAU/USD) rose by 0.40% due to a decline in the US Dollar Index and a decrease in the 10-year Treasury yield. This increase is attributed to speculation that the Federal Reserve (Fed) will potentially lower borrowing costs in 2023, resulting in expectations of over 135 basis points in rate cuts by December 2024, according to CBOT futures. Additionally, upcoming US economic data, including Q3 GDP and core PCE, will provide further insight into gold’s trajectory amid ongoing housing market stability.
The US Dollar Index (DXY) is down 0.40% at 102.09, while the US 10-year benchmark note rate is at 3.913%, its lowest in the last four days. Last week, Fed Chair Jerome Powell hinted at a potential policy easing in 2023, prompting discussions about rate cuts. However, New York Fed President John Williams raised questions about the restrictiveness of monetary policy.
The market has responded by factoring in more than 135 basis points of rate cuts for December 2024, with odds for a rate cut in March standing at 70%. This has led to increased interest in gold as investors anticipate potential interest rate cuts by the Fed.
Looking ahead, the US economic calendar will be significant, with the release of Q3 GDP, Durable Goods Orders, core PCE, and additional housing data. These data points will also influence the trajectory of gold prices.
From a technical standpoint, the XAU/USD uptrend is expected to continue, although it may need to reclaim the $2050 level to test the previous year-to-date high and potentially reach $2100. Conversely, a failure to surpass $2050 could lead to consolidation in the $2009-$2050 range, and a breach of the bottom of that range could put the $2000 figure into play.
Overall, the current climate of anticipation regarding potential policy shifts by the Fed and its impact on the US economy is driving the increase in gold prices. Additional insights into the Fed’s plans and the performance of the US economy will continue to shape the trajectory of gold prices in the coming months.
