Gold consolidates post-Powell remarks, eyes on US jobs data

• Gold rises as Powell underscores the need for cautious monetary policy.
• Mixed US economic data, including slightly disappointing ADP employment changes, support cautious investor sentiment.
• Fed’s Musalem keeps optionality for the December meeting.

Gold price advances during Wednesday’s North American session, sponsored by mixed US economic data. Nevertheless, the non-yielding metal remained slightly subdued as Federal Reserve (Fed) Chair Jerome Powell crossed the wires. The XAU/USD trades at $2,652, up 0.35%.

Powell said the US economy is in good shape, adding that September’s rate cut was a message to support the labor market. He said that despite showing progress, it’s premature to declare victory on inflation, and the US central bank could be cautious in setting monetary policy.

Recently, inflation has proved to be stickier than expected. The latest three readings indicate that the disinflation process has stalled. Despite ticking up a tenth, prices remain far from hitting the Fed’s 2% goal.

Other officials crossed the newswires.  St. Louis Fed President Alberto Musalem suggested that the time to slow or pause rate cuts might be approaching. He noted that the labor market aligns with full employment and expressed confidence that inflation could reach the 2% target within the next two years.

Meanwhile, Richmond Fed President Thomas Barkin stated that the risks to inflation and maximum employment appear balanced.

On the data front, US ADP National Employment Change figures came a whisker lower than foreseen in November, but October was downwardly revised. S&P Global and the Institute for Supply Management (ISM) revealed that Services PMIs cooled slightly, hinting the economy remains strong but is slowing down.

Ahead this week, the US docket will feature Fed speakers, Initial Jobless Claims and Nonfarm Payrolls (NFP) figures.

Daily digest market movers: Gold price capitalizes on weak US data

• Gold prices advanced as US real yields dropped four basis points to 1.904%.
• The US 10-year Treasury bond yield falls four basis points to 4.184%.
• The US Dollar Index (DXY), which tracks the buck’s performance against six currencies, stumbles 0.01% to 106.32 on the day.
• The US ADP National Employment report for November showed private hiring increased by 145K, falling short of the 150K forecast and the downwardly revised October figure of 184K, previously 238K.
• November’s ISM Services PMI dropped to 52.1 from 56, underperforming the expected 55.7, while the S&P Global Services PMI also fell, declining to 56.1 from 57 and missing projections.
• US Durable Goods Orders rose by 0.3% MoM in October, slightly improving from the 0.2% reported previously.
• ADP data and the latest Job Openings & Labor Turnover Survey (JOLTS) report on Tuesday confirm that the labor market remains solid. Fed policymakers, who shifted their dual-mandate priority towards maximum employment, leaving aside price stability, can be relieved that the economy remains solid.
• The CME FedWatch Tool indicates a 79% probability of a 25-basis-point rate cut at the Federal Reserve’s December meeting, while Chicago Board of Trade data points to 19 bps of easing by the end of 2024.

Technical outlook: Gold price consolidates within $2,600 and the 50-day SMA

Gold remains upwardly biased yet remains subdued between $2,600 to $2,650 for the last seven days. It is capped on the upside by the 50-day Simple Moving Average (SMA) at $2,668; if it’s broken, this would expose $2,700.

On further strength, bulls can test the year-to-date (YTD) high at $2,790. Conversely, bears stepping in could drag XAU/USD to $2,600, followed by the 100-day SMA at $2,578.