20 Dec 2024

• Gold price attracts some haven flows on Friday amid the looming US government shutdown.
• The Fed’s hawkish tilt remains supportive of elevated US bond yields and caps the XAU/USD.
• Traders now look forward to the release of the US PCE Price Index for short-term opportunities.
• Gold price (XAU/USD) continues to exhibit a strong demand during the initial part of the European session on Friday, reflecting a prevailing risk-averse sentiment. In light of ongoing geopolitical tensions and concerns regarding trade disputes, the potential for a US government shutdown is prompting a shift towards safe-haven assets, including gold. This global movement towards safety has resulted in a slight decline in US Treasury bond yields, which in turn has limited the recent surge of the US Dollar (USD) to a two-year high, providing further support to the precious metal.
  
  However, the Federal Reserve's (Fed) indication of a more cautious approach to rate cuts in 2025 serves as a supportive factor for US bond yields and benefits USD bulls. Consequently, this development hampers the ability of non-yielding gold to fully leverage its intraday gains above the $2,600 threshold. Market participants are now awaiting the US Personal Consumption Expenditure (PCE) Price Index, which is anticipated to impact USD price movements and subsequently influence XAU/USD during the early North American trading session.

• Gold price bulls seem non-committed amid the prospects for a slower rate cuts by the Fed

  The US House of Representatives was unable to pass a spending bill on Thursday, increasing the likelihood of a government shutdown by the end of the day on Friday. This situation is compounded by ongoing geopolitical uncertainties and apprehensions regarding the tariff strategies proposed by US President-elect Donald Trump, which are contributing to a shift of investment towards gold as a safe haven.
  
  Additionally, US Treasury bond yields have decreased from a multi-month high, which has limited the recent surge of the US Dollar to a two-year peak and provided further support for the commodity market. The US Bureau of Economic Analysis announced on Thursday that the economy grew at an annualized rate of 3.1% in the third quarter, surpassing the previously estimated 2.8%.
  
  Further data released on Thursday indicated that the number of new jobless claims in the US fell more than anticipated, reaching 220,000 for the week ending December 14. This development reinforces the Federal Reserve's hawkish stance regarding a gradual approach to rate cuts in 2025, which is likely to bolster US bond yields and restrain the appeal of non-yielding gold. Moreover, market participants may be cautious in making significant investments ahead of the upcoming release of the US Personal Consumption Expenditure (PCE) Price Index, which is the Federal Reserve's preferred measure of inflation.

  Gold price might continue to attract sellers near $2,625, or the overnight swing high

  From a technical standpoint, the decline following the FOMC meeting, which fell below the 100-day Simple Moving Average (SMA), has emerged as a new catalyst for bearish traders. Additionally, the oscillators on the daily chart are exhibiting increasing negative momentum, indicating that the most likely direction for Gold prices is upward. Consequently, any subsequent upward movement may encounter immediate resistance near the overnight swing high, approximately in the $2,626 range. However, if there is sufficient follow-through buying, it could initiate a short-covering rally, propelling the XAU/USD towards the next significant resistance level in the $2,652-2,655 supply zone. A sustained move beyond this level could eliminate the current negative sentiment and open the door for further gains.
  
  Conversely, the monthly low around the $2,583 level, reached on Thursday, may serve as a protective barrier for the immediate downside. Should the Gold price fall below this level, it could decline to the $2,560 area, potentially heading towards the $2,537-2,536 zone or the swing low from November. This downward movement could extend further to the psychological threshold of $2,500 before the XAU/USD ultimately approaches the critical support of the 200-day SMA, which is currently situated near the $2,472 level.