Gold prices consolidated after reaching a monthly high as upbeat US economic data reduced expectations of further Fed stimulus. The gold price may remain supported if the latest US PCE price index shows another month of high inflation, but it faces a pullback ahead of the Fed's policy update. Technical indicators suggest gold could stage a deeper correction if it fails to hold above $1,850 support.
1. Gold Price To Stay Afloat On Strong
US PCE Price Report
2. Points To Be Discussed Today:
• Gold Price Talking Points
• Fundamental Forecast For Gold Price:
Neutral
• Gold To Consolidate?
• GOLD (XAUUSD) - Weekly Technical
Analysis
• XAU/USD Could Stage A Deep Correction
4. Gold Price Talking Points
• The price of gold consolidates after
trading to a fresh monthly high
($1877), and data prints coming out
of the US may keep bullion afloat as
Federal Reserve officials now brace
for sticky inflation.
5. Fundamental Forecast For Gold Price:
Neutral
• The recent breakout in the price of gold appears
to have stalled as the upbeat US Retail Sales
report puts pressure on the Federal Reserve to
deliver a rate hike sooner rather than later.
• And the precious metal may face a larger pullback
ahead of the next interest rate decision on
December 15 as Chairman Jerome Powell and Co.
are slated to update the Summary of Economic
Projections (SEP).
6. Fundamental Forecast For Gold Price:
Neutral - I
• Looking ahead, it remains to be seen if the
fresh forecasts from Fed officials will sway
market expectations as Chicago Fed
President Charles Evans, who votes on
the FOMC this year, argues that the figures
from the September meeting are “stale” and
believes that the “supply chain issues are
going to be rectified” in 2022.
7. Fundamental Forecast For Gold Price:
Neutral - II
• As a result, President Evans insists that the
Fed “will be in a better position to understand
where future inflation pressures are going to
go” once the central bank finishes winding
down its emergency measures.
• And the FOMC’s exit strategy may continue to
lift longer-dated US Treasury yields as the
committee prepares for a “more neutral
setting for monetary policy.”
9. Fundamental Forecast For Gold Price:
Neutral - IV
• Nevertheless, the update to the Personal
Consumption Expenditure (PCE) Price Index is
likely to overshadow the FOMC Minutes if the
Fed’s preferred gauge for inflation increases
for 11 straight months.
• And another uptick in the headline and core
reading may prop up the price of gold as the
central bank appears to be on a preset course.
10. Fundamental Forecast For Gold Price:
Neutral - V
• With that said, the Fed’s gradual
approach in removing monetary stimulus
may prop up the price of gold throughout
the remainder of the year as signs of
persistent inflation encourages market
participants to hedge against inflation.
11. Gold To Consolidate?
• An ongoing CTA buying program in gold could
soon be running out of steam, leaving the yellow
metal vulnerable to a deeper consolidation,''
analysts at TD Securities argued.
• ''After all, while the yellow metal remains an ideal
hedge against rising stag flationary winds, the
tug-of-war between high inflation prints and
market pricing for central bank hikes hasn't
definitively concluded.''
14. XAU/USD Could Stage A Deep Correction If
$1,850 Becomes Resistance
• Gold reversed its direction after climbing
to multi-week highs above $1,870.
• XAU/USD could come under renewed
bearish pressure if $1,850 support fails.
• Markets are expected to turn quiet after
high-tier data releases from the US on
Wednesday.
15. Gold Struggled To Build
• Gold struggled to build on the previous week’s
inflation-fueled rally and closed in negative
territory on Monday and Tuesday.
• Although the yellow metal managed to regain
its traction on Wednesday, it failed to gather
enough bullish momentum to clear the $1,870
hurdle and dropped toward the lower limit of
its weekly range before settling below $1,860
ahead of the weekend.
16. What Happened Last Week
• Rising US Treasury bond yields made it difficult
for XAU/USD to continue to push higher at the start of
the week.
• The benchmark 10-year US Treasury bond yield
advanced to fresh multi-week tops near 1.65% and
helped the dollar preserve its strength.
• The US Census Bureau reported on Tuesday that Retail
Sales increased by 1.7% on a monthly basis in October,
compared to the market expectation of 1.4%.
• This print reminded investors of the strong goods
inflation
17. What Happened Last Week - I
• With XAU/USD rising 0.9% amid a 3% decline
in the 10-year US T-bond yield on Wednesday,
the inverse correlation between gold and
yields became a driving factor once again.
• Confirming that view, the pair started to
retreat as the 10-year yield steadied around
1.6% in the second half of the week.
18. What Happened Last Week - II
• The US Department of Labor’s weekly publication
revealed that there were 268,000 initial claims
for unemployment benefits in the week ending
November 13.
• The Federal Reserve Bank of Philadelphia
reported that business activity in the Third
Federal Reserve District expanded at a strong
pace in November with the Philly Fed
Manufacturing Index improving to 39 from 23.8
in October.
19. What Happened Last Week - III
• In the meantime, Fed officials delivered mixed comments
on the policy outlook that capped bond yields’ upside.
• San Francisco Fed President Mary Daly called for the Fed to
remain patient when it comes to hiking the policy rate,
arguing that tight policy would slow the economic recovery
instead of fixing high inflation.
• On a hawkish note, St. Louis Fed President James Bullard
said the Fed could accelerate the pace of the asset taper to
$30B per month and open the door to a rate hike in the
first quarter of 2022.
• Finally, Chicago Fed President Charles Evans noted the Fed’s
policy was in a good place and added that it would be
appropriate for asset purchases to end mid-2022.
20. Gold Price To Stay Afloat On Strong
US PCE Price Report
