Gold registered gains of over $0.20 after the Federal Reserve adopted a less dovish approach. On Thursday, it trimmed some losses from Wednesday and posted a minor advance of 0.20%. The XAU/USD trades at $2,588 after reaching a daily high of $2,626.
US Economic Data Highlights
The US economic docket on Thursday showed a drop in Americans asking for unemployment benefits. Also, the US GDP grew 3.1% year-on-year (YoY) in Q3 in its final release, as per the US Bureau of Economic Analysis.
Fed’s Rate Cut and Future Outlook
Fed Chair Jerome Powell and the Federal Open Market Committee (FOMC) board reduced borrowing costs by 25 basis points. However, it wasn’t unanimous. Fed officials forecast two 25 bps rate cuts in 2025 and two more for 2026 while also focusing on inflation as shown in the dot plot.
Potential US Government Shutdown
The US government is close to a possible shutdown with US President-elect Donald Trump pressuring Republicans in the House of Representatives regarding the debt ceiling. A shutdown would likely push gold prices higher as it has safe-haven status during political uncertainty, especially in a low-interest environment.
Related Plans to Avoid Shutdown
Reuters cited Politico sources that US Speaker Johnson and President-elect Trump’s team are considering a new federal funding stop-gap plan that includes disaster aid, pushing off a debt limit fight for two years, and agreeing to a one-year farm bill extension.
Key Economic Data to Watch
Ahead this week, the core Personal Consumption Expenditures (PCE) Price Index (the Fed’s favorite inflation gauge) and the University of Michigan (UoM) Consumer Sentiment poll will be released.
Market Movers Impact on Gold
Yields and Bond Yield Changes: Gold prices climb despite rising US real yields, which are up by three basis points to 2.248%. The US 10-year Treasury bond yield rose five basis points to 4.568% after the Fed’s decision.
US Dollar Index: The US Dollar Index, tracking the performance against six other currencies, surged 0.16% to 108.39.
Initial Jobless Claims: Initial Jobless Claims in the US for the week ending December 14 dipped from 242K to 220K, below forecasts of 230K, indicating a solid labor market.
GDP and Inflation Projections: Federal Reserve officials estimate inflation to end 2024 at 2.8%, 2.5% in 2025, and 2.2% in 2026. Policymakers project the economy to grow by 2.5% in 2024, 2.1% in 2025, and 2% in 2026.
Gold’s Technical Outlook
Resistance Levels: Gold’s price uptrend is intact, but it’s facing stiff resistance at the 100-day Simple Moving Average (SMA) at $2,605 and the psychological $2,600 figure.
Bearish Scenario: For a bearish resumption, bears need to clear the $2,550 figure, followed by the November 14 swing low of $2,536. If surpassed, the next stop would be the $2,500 level.
Bullish Scenario: For a bullish resumption, the XAU/USD must clear $2,600, then $2,650, and the 50-day SMA at $2,670. Once cleared, the next stop would be $2,700.
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