Skip to content Skip to footer

Gold Price Forecast: Bullish Surge as US Inflation Softens and Rate Cut Hopes Rise

The GOLD  ,market (XAU/USD) has maintained its bullish momentum, consistently trading above $2,050.

Recent data from the US Bureau of Economic Analysis, which showed a less pronounced rise in the core Personal Consumption Expenditure (PCE) price index for November, are largely responsible for this positive trend.

The monthly core PCE index reported a modest increase of 0.1%, falling short of the projected 0.2% rise. Year-on-year, inflation has decelerated to 3.2%, slightly below the expected 3.3%.

This alignment of the actual inflation rate with the Federal Reserve’s end-of-year projection of 3.2% has significantly swayed market sentiment. Given the current interest rate at its highest in over two decades, investors are now closely watching for indications of upcoming rate cuts.

This speculation has been especially potent as signs of easing US inflation emerge, propelling XAU/USD to briefly exceed $2,070.

As gold prices breached the crucial resistance level of $2,060, investor focus intensifies on the Federal Reserve’s monetary policy direction. The annual US core PCE figure, in tandem with the Fed’s recent Summary of Projections, suggests that if inflation continues to recede more than anticipated, the Fed’s stringent policy stance might relax sooner than expected.

Market participants are currently expecting the Fed to initiate its first rate cut as early as March, with another likely following in May. Remarks from Fed Chairman Jerome Powell about the undesirability of excessively high interest rates have amplified these anticipations.

Despite some Fed officials attempting to temper expectations of imminent rate cuts, the US Dollar has been under strain due to a marginal revision in the Q3 GDP estimate. This revision hints at underlying labor market challenges and issues of price stability, even as the US economy demonstrates notable resilience compared to other major G7 economies.

Consequently, the prospect of a rate cut and emerging economic challenges have applied pressure on the US Dollar, bolstering gold’s appeal as a safe-haven asset.

In terms of technical outlook, the GOLD price exhibits steady positive trades, reinforcing its position above the breached neckline of the double bottom pattern, indicating the continuation of bullish momentum. The immediate target is set at $2,065.70, with expectations of breaching this level to pave the way towards $2,100.00 as the next principal objective. It’s crucial to note that sustaining above $2,016.90 is a key factor for the ongoing bullish trend.

Today’s trading range is anticipated between the support level of $2,035.00 and the resistance at $2,070.00, with a bullish trend expected to dominate the day’s trading activities.

Source: Fxleaders