Gold price advances further as expectations over Federal Reserve rate cut bets deepen

• Gold price rises sharply above $2,050 as Fed’s rate cut expectations remain in the spotlight.
• The US Dollar Index was battered by rate cut bets and downwardly revised US Q3 GDP data.
• Investors await core PCE price index and Durable Goods Orders data for further action.

Gold price (XAU/USD) climbs swiftly above the crucial resistance of $2,050 as market participants are betting in favour of early interest rates unwinding by the Federal Reserve (Fed). The significant improvement in the Consumer Price Index (CPI) towards the 2% target has boosted hopes of early rate cuts by the Fed. 

Meanwhile, investors await the United States core Personal Consumption Expenditure (PCE) price index data for November. A soft underlying inflation report would strengthen confidence among investors about early rate cuts, while a report which showed that price pressures remain sticky would offer a temporary cushion to the US Dollar.  

Daily Digest Market Movers: Gold price advances as US Dollar retreats

• Gold price delivers a decisive break above the crucial resistance of $2,047 as the US Dollar came under pressure after a slight downgrade in the third quarter Gross Domestic Product (GDP) estimate on Thursday.
• The US Bureau of Economic Analysis (BEA) downgraded Q3 growth rate in its revised estimate to 4.9% against expectations of 5.2%, weighing heavily on the US Dollar.
• A downwardly revised GDP indicates a cooling labour market and price pressures. Still, economic growth in the US is still higher in comparison with other Group of Seven economies.
• In addition to that, deepening expectations for a soft US core PCE price index report for November has underpinned the Gold price against the US Dollar. The data will be published at 13:30 GMT.
• The core PCE price index is expected to increase at a steady pace of 0.2% in November. The annual underlying inflation measure is seen softening to 3.3% against the prior release of 3.5%.
• In the monetary policy statement of December, Fed policymakers projected that PCE inflation, their preferred inflation tool, would decelerate to 3.2% by the end of 2023.
• A steeper-than-projected decline in the underlying inflation report would push back expectations of a longer restrictive policy stance and put the rate-cut factor into the spotlight. 
• Investors are pricing in that the Fed would announce its first rate cut in March after a year-long rate tightening spell. A second cut would come in May.
• Expectations for lowering interest rates were boosted by commentary from Fed Chairman Jerome Powell , who talked about avoiding the mistake of keeping interest rates too high.
• The majority of Fed policymakers are trying hard to push back expectations of rate cuts, emphasizing the idea of keeping interest rates in a restrictive trajectory until the achievement of price stability.
• Fed policymakers are reiterating that strong resilience in the US economy could keep inflation fears persistent.
• Apart from the US core PCE price index, investors will also focus on the US Durable Goods Orders for November. New orders for durable goods are seen increasing by 2.2% against a 5.4% decline in October. A more-than-projected increase in new orders would provide some cushion to the US Dollar.

Technical Analysis: Gold price prints a fresh two-week high above $2,050

Gold price refreshes two-week high above $2,050 after recovering swiftly from $1,974. The precious metal is expected to continue its upside towards $2,070, supported by deepening rate cut expectations. A bullish momentum has been triggered as the Relative Strength Index (RSI) (14) has climbed above 60.00.