Gold Price Forecast: XAU/USD flat lines near $4,200 ahead of US PCE inflation release
- Gold price holds steady around $4,205 in Friday’s early Asian session.
- Higher yields and upbeat US jobs data could weigh on Gold price; Rising Fed rate cut bets might cap its losses.
- The US delayed PCE inflation report will take center stage later on Friday.
Gold price (XAU/USD) trades on a flat note near $4,205 during the early Asian trading hours on Friday. Rising US Treasury yields and upbeat US jobs data cap upside for the precious metal. Traders might prefer to wait on the sidelines ahead of the key US inflation data. The US delayed the Personal Consumption Expenditures (PCE) Price Index report for September, which will be published later on Friday.
Higher yields and stronger US jobs data could provide some support to the US Dollar (USD) broadly and weigh on the USD-denominated commodity price. Data released by the US Department of Labour (DOL) on Tuesday showed that US Initial Jobless Claims for the week ending November 29 declined to 191,000, compared to 218,000 in the previous week. This figure came in lower than the market consensus of 220,000.
Traders will closely monitor Friday's US PCE inflation data for more clues on the Federal Reserve's (Fed) policy outlook ahead of its December meeting. Any signs of hotter inflation in the US economy could undermine the Gold price in the near term.
Meanwhile, the Fed is widely anticipated to reduce its key interest rate by 25 basis points (bps) at its December policy meeting next week. This, in turn, could underpin the yellow metal. Lower interest rates could reduce the opportunity cost of holding Gold, supporting the non-yielding precious metal.
Uncertainty and elevated geopolitical risks could boost the safe-haven flows, benefiting the Gold price. US President Donald Trump said on Wednesday that the path ahead for Ukraine peace talks is unclear. These comments came after Trump called the "reasonably good" talks between Russian President Vladimir Putin and US envoys. Ukrainian President Volodymyr Zelenskiy stated that his team is preparing for meetings in the US and that the dialogue with Trump's representatives will continue.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling 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 Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.