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As of this writing, the price of the precious metal pulled back to about $2053 after briefly rallying up to flirt $2,070 before Friday’s pre-holiday closing. Gold is being pressured higher by growing investor bets on quicker, more frequent Fed rate cuts.
US inflation is still down, and Treasury yields are easing as risk appetite rises. Thus, on Friday, gold briefly rose beyond $2,070 before retreating closer to the opening of the day.
The markets are quite impatient for the Fed to start decreasing interest rates, and investor anticipation of an increased pace of rate cuts in 2024 are being bolstered by the fact that the US’s main interest rate is currently at a 22-year high.
The US Annualized Core Personal Consumption Expenditures (PCE) Price Index increased by 3.2% in November compared to the same month the previous year, slowing down from 3.3% in market expectations and further decreasing from 3.4% (which was also revised down from 3.5%).
The markets are pushing the US dollar lower, though it is struggling to hold steadily, this benefits gold in anticipation of potential rate cuts from the Fed, which may have been prematurely announced. The Fed’s dot plot of interest rate expectations indicates a median forecast of 75 basis points in rate cuts through the end of 2024.
In contrast, bets on cumulative rate cuts of 160 basis points are already priced in the markets, with some especially keen market participants wagering on a rate cut as early as March of next year.
As the markets prepare for the holiday market break and close out the final full trading week of 2023, Friday’s early action saw a significant reversal as the dollar reduced the day’s losses and gold returned to its opening bids.
Technically, on Friday, spot gold surged over 1.10% from bottom to top in a final-hour bull run, but it crashed at $2,070 and reversed back towards Friday’s opening at $2,050.
Since breaking to the topside of the moving average last week near $2,020, intraday behaviour in the Gold Index.
Since spot gold bottomed out near $1820 in early October, a higher-lows pattern has been baked into the Gold Index on daily candles, and long-term technical support is coming from the 200-day SMA climbing into $1960.
The early December advance to all-time highs has trapped near-term gold bids in bull territory, and bearish patterns won’t emerge until the Gold Index breaks back below the $2000 major level.
