- The price of Gold is moving within a narrow range awaiting the first estimate of US GDP for the fourth quarter.
- The DXY Dollar Index consolidates ahead of new guidance on interest rates.
- The resilience of the US economy continues to reinforce the attractiveness of restrictive interest rates, which is negative for the price of Gold.
The price of Gold (XAU/USD) remains in the woods as investors await the release of the US Gross Domestic Product (GDP) for the fourth quarter, which will provide new information on which to base an outlook for interest rates. Investors are watching as upbeat GDP data could weaken the consensus argument for an early interest rate cut by the Federal Reserve (Fed).
Stronger US PMI data, released by S&P Global, reflects the resilience of the US economy, which would allow Fed policymakers to call rate cuts from March “premature.” The US economy is resilient amid an upbeat labor market and robust consumer spending. Furthermore, the interest rate cuts planned by the Fed for this year have given a positive tone to the economic outlook.
Aside from the fourth quarter GDP data, market participants will focus on the December Personal Consumption Expenditure (PCE) price index data, which will be released on Friday. Fed officials prefer core inflation when deciding interest rate policy.
Daily Market Summary: Gold Price Moves Sideways Awaiting US Data
- The price of Gold is moving around $2,015 after a sharp drop, awaiting the US GDP data for the fourth quarter, which will be published at 13:30 GMT.
- Investors expect the U.S. economy to expand at a slower pace of 2.0%, down from the strong 4.9% growth recorded in the third quarter of 2023.
- A moderate economic expansion would alleviate stubborn inflation prospects and discourage Federal Reserve policymakers from advocating a restrictive stance on interest rates.
- According to the CME's Fedwatch tool, the odds in favor of a 25 basis point (bp) interest rate cut in March have fallen to 42.4%.
- Bets in favor of lower interest rates diminished due to the strong recovery in US PMIs in December. The Manufacturing PMI came in above the 50.0 threshold at 50.3, above expectations and the previous reading of 47.9.
- The services PMI, which accounts for two-thirds of the U.S. economy, rose to 52.9 from the previous reading of 51.4 and expectations of 51.0.
- The strong recovery in US economic activity indicates that the economy has started 2024 on the right foot and has improved prospects for the entire year.
- Business confidence was bolstered by hopes of easing inflation, the cost of living crisis and lower interest rates.
- The strong PMI numbers pushed the US Dollar to recover strongly. The appeal for the dollar could strengthen further if the US GDP data turns out stronger than expected.
- The DXY Dollar Index has gradually corrected to near 103.20 and is expected to remain moderate going forward.
- Following the US Q4 GDP data, market participants will turn their attention to December core PCE inflation data, due out on Friday.
- If the underlying PCE price index remained firm, it would strengthen the case for tight monetary policy.
- Next week, the Fed is expected to maintain the status quo, but a persistent inflation report would allow it to support raising interest rates at least through the end of the first half of 2024.
Technical Analysis: Gold price maintains support around $2,000
Gold price moves within trading range on Wednesday as investors eagerly await US Q4 GDP data. Precious metal consolidates above $2,016 but remains below average 20-day exponential moving forward (EMA), indicating that short-term demand is bearish. The 14-period Relative Strength Index (RSI) remains within the range of 40-60, showing less chances of a sharp move. A bearish move could occur if the yellow metal fails to stay above the psychological support of $2,000.
Frequently asked questions about Gold
Why invest in Gold?
Gold has played a fundamental role in human history, as it has been widely used as a store of value and medium of exchange. Today, aside from its brilliance and use for jewelry, the precious metal is considered a safe-haven asset, meaning it is considered a good investment in turbulent times. Gold is also considered a hedge against inflation and currency depreciation, since it does not depend on any specific issuer or government.
Who buys more Gold?
Central banks are the largest holders of Gold. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and purchase Gold to improve the perception of strength of the economy and currency. High Gold reserves can be a source of confidence for the solvency of a country. Central banks added 1,136 tons of gold worth about $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the largest annual purchase since records exist. Central banks in emerging economies such as China, India and Turkey are rapidly increasing their gold reserves.
What correlation does Gold have with other assets?
Gold has an inverse correlation with the US Dollar and US Treasuries, which are the main reserve and safe haven assets. When the Dollar depreciates, the price of Gold tends to rise, allowing investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken the price of Gold, while sell-offs in riskier markets tend to favor the precious metal.
What does the price of Gold depend on?
The price of Gold can move due to a wide range of factors. Geopolitical instability or fear of a deep recession can cause the price of Gold to rise rapidly due to its status as a safe haven asset. As a non-yielding asset, the price of Gold tends to rise when interest rates fall, while rising money prices tend to weigh down the yellow metal. Still, most of the moves depend on how the US Dollar (USD) performs, as the asset is traded in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold in check, while a weaker Dollar is likely to push up Gold prices.
Source: Fx Street

I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.