Gold price remains supported by Middle East tensions, US core PCE inflation data eyed

• Gold price consolidates ahead of the US core PCE inflation reading for September.
• The downside in the Gold price remains cushioned by escalating tensions in the Israel-Palestine conflict.
• US Yellen sees Treasury yields elevated on Fed’s “higher for longer” interest rates outlook.

Gold price (XAU/USD) trades in a tight range around $1,990 as the downside is cushioned by escalating Middle East tensions while the upside is limited by more upbeat US economic data, namely robust Q3 Gross Domestic Product (GDP) and Durable Goods Orders. The precious metal is expected to deliver a decisive move after the release of the Core Personal Consumption Expenditure (PCE) inflation data, which will set the undertone for the upcoming monetary policy meeting of the Federal Reserve (Fed), scheduled for November 1.

The US Dollar and long-term bond yields recovered sharply after blockbuster GDP numbers as the data shows resilience in the US economy. The phenomenal GDP growth aligns with the “soft landing” scenario envisaged by the Fed in its battle against stubborn inflation. Still, the upside in the Gold price could remain restricted as US Treasury yields may remain elevated for a long amid the Fed’s “higher for longer interest rates” plot. 

Daily Digest Market Movers: Gold price awaits US Core PCE inflation data

• Gold price consolidates around $1,990.00 as Israel-Palestine tensions continue to provide a cushion.
• The Israeli army entered Gaza briefly to carry out a ground raid. Furthermore, a senior official of Hamas has urged allies to intervene in the ongoing conflict to defend Gaza from a full-scale invasion from Israeli troops.
• The risks of Iran-backed Hezbollah’s intervention in the Israel-Palestine war persist as Western nations have been supporting Israel.
• Gold price faced selling pressure near $1,990.00 on Thursday after upbeat US GDP and Durable Goods Orders data, but managed to firm amid geopolitical tensions.
• The US Bureau of Economic Analysis (BEA) reported that the US economy grew at a stronger pace of 4.9% in the July-September quarter on an annualized basis, against expectations of 4.2% growth and doubling the 2.1% rate seen in the second quarter. 
• US economic strength in the third quarter was driven by robust consumer spending amid a tight labor market, rising residential investment, and high government spending. 
• Consumer spending grew by 4% in the July-September quarter against a 0.8% reading in the second quarter. 
• Still, the US GDP report showed that business investment contracted for the first time in two years as firms postponed capacity expansion due to higher borrowing costs. Firms relied on inventory backlog and achieving efficiency to cater to households’ demand.
• US Durable Goods Orders data for September, also released on Thursday, pointed to sharply increasing demand ahead for the US manufacturing sector.
• New orders for durable goods rose 4.7% against expectations of 1.5%. In August, orders contracted marginally by 0.1%.
• After the release of the GDP data, US Treasury Secretary Janet Yellen said in an interview with Bloomberg that strong GDP numbers point to a “soft landing”, but that these strengths will also keep bond yields elevated.
• Janet Yellen said that high US bond yields reflect strong confidence in the US economy and indicate that interest rates will remain higher for a longer period. 
• The US Dollar Index (DXY) looks set for a positive weekly closing but edges down on Friday from a two-week high of 106.90.  Investors turn cautious ahead of core PCE inflation data for September, which will be published at 12:30 GMT. 
• Investors will keenly focus on the Fed’s preferred inflation gauge as it could impact the Fed decision on November 1. 
• Monthly core PCE inflation is expected to grow by 0.3% in September against the 0.1% growth recorded in August. On an annual basis,  PCE inflation is forecast to rise by 3.7%, lower than the 3.9% increase in August.

Technical Analysis: Gold price trades sideways around $1,990

Gold price rebounds gradually after a corrective move to near $1,970.00. The precious metal is broadly trading directionless inside Thursday’s range as investors await the US core PCE reading, which will provide some cues about the Fed’s monetary policy action on November 1. The 20-day Exponential Moving Average (EMA) has crossed the 50-day and 200-day EMAs to the upside, portraying a bullish near-term trend.