Gold surges on hopes for Fed easing spurred by US inflation data

• Gold price climbs, remaining above $2,700, ignoring high US yields.
• US CPI data confirms ongoing disinflation, bolstering expectations for a Federal Reserve rate cut next week.
• Market anticipates a potential rate cut, with swaps pricing a 92% likelihood, focusing next on upcoming PPI and jobless claims data.

Gold prices prolonged their uptrend on Wednesday following the release of inflation figures in the United States (US). Expectations that the Federal Reserve (Fed) would cut interest rates next week were reaffirmed as the disinflation process evolves, yet at a slower pace. The XAU/USD trades at $2,711, posting gains of 0.40%.

The US Consumer Price Index (CPI) remained firm in November, with headline and core figures aligned with economists’ monthly and annual estimates, revealed the US Bureau of Labor Statistics (BLS).

US Treasury bond yields slipped, with the 10-year T-note coupon diving to a low of 4.201% before recovering to 4.24%, up one basis point. The US Dollar Index (DXY), which measures the performance of the American currency against a basket of six other currencies, rises by 0.29% to 106.68.

Following the data, the swaps market had priced 92% odds for a 25 basis points (bps) rate cut by the Federal Reserve. This would diminish the Fed funds rate to 4.25%-4.50% at the December 17-18 meeting.

Analysts at Goldman Sachs noted that China’s central bank “may even increase Gold demand during periods of local currency weakness to boost confidence in their currency.”

Now that CPI figures are in the rearview mirror, investors’ focus will shift to the release of the Producer Price Index (PPI) and Initial Jobless Claims numbers for the week ending December 7.

Daily digest market movers: Gold price climbs ignoring high US yields

• Gold prices advanced as US real yields rose two basis points to 1.958%.
• The US Bureau of Labor Statistics (BLS) revealed that headline CPI was 0.3% MoM, a tenth high, but aligned with estimates. Core CPI was unchanged at 0.3% MoM, aligned with October and Wall Street projections.
• In the twelve months to November, CPI was up from 2.6% to 2.7%, while core CPI was unchanged compared to October, as projected by the consensus at 3.3%.
• Data from the Chicago Board of Trade, via the December Fed funds rate futures contract, shows investors estimate 24 bps of Fed easing by the end of 2024.

Technical outlook: Gold price resumes its bullish trend, eyes $2,721

Gold uptrend continues with prices clearing the $2,700 figure, yet Bullion remains below the November 25 peak of $2,721.

Momentum remains bullish, as portrayed by the Relative Strength Index (RSI). With that said, the XAU/USD remains bullishly biased.

Bullion’s first resistance would be $2,721. On further strength, the next stop would be $2,750, followed by the all-time high of $2,790.

Conversely, if XAU/USD tumbles below the 50-day Simple Moving Average (SMA) of $2,685, the next support would be the $2,650 figure. Once surpassed, the next support would be $2,600, followed by an upsloping support trendline and the 100-day Simple Moving Average (SMA) in the $2,580 to $2,591 area.