Gold closes the week above $2,700, with PCE data from the US in focus

Gold prices rose 1.50% on Friday, helped by a decline in the yield of 10-year US Treasury bonds to 4.40%.
Growing geopolitical concerns, including the potential expansion of the Russian-Ukrainian conflict, the need for fuel to obtain unthreatening haven status for Bullion.
US economic data shows mixed signals; Services and Composites PMIs are outperforming, while Manufacturing PMIs continue to decline.

During the North American session on Friday, the price of gold hit a recent two-week high as US Treasury yields fell. Geopolitics continued to play its role in maintaining the price of the gold metal, while US business activity improved, limiting the surge in interest in the unalloyable metal. The XAU/USD rate is at $2,710, gaining 1.50%.

The yellow metal gained in value due to a slight decline in US Treasury bond yields. US 10-year T bonds fell two basis points to 4.40%, a tailwind for bullion prices that will push them up more than 5% in a week.

The risk that the Russian-Ukrainian war could expand and turn into a US-Russian conflict keeps bullion prices high. This and uncertainty over the conflict in the Middle East involving Israel and Lebanon could pave the way for a retest of the XAU/USD all-time high of $2,790.

On the data side, the US economic report included the release of S&P Global’s flash PMIs for November. The Services and Composite indexes rose, exceeding estimates and data from October. However, the manufacturing PMI, despite improving above the previous month’s forecasts and releases, remained below the 50 line that divides areas of expansion/contraction.

Recently, the University of Michigan (UoM) revealed that consumer sentiment among Americans has improved compared to its preliminary reading, and inflation is expected to approach the Federal Reserve’s (Fed) target of 2% over the next 12 months.

Meanwhile, some over-the-top Fed officials have expressed subtle concern about stopping inflation from progressing. While most favor looser policies, they acknowledge that the economy remains solid; and if inflation strengthens above the 2% target, they may interrupt the monetary easing cycle.

Traders confined the chances of a 25 basis point rate cut at the December meeting. The CME FedWatch Tool sees a 56% chance of a rate cut, down from a 58% chance two days ago.

Key economic indicators, including Federal Reserve meeting minutes, October tough goods orders and the Personal Consumption Expenditures (PCE) price index, the Fed’s preferred measure of inflation, will be released next week.

Daily market movement summary: Gold refreshes two-week high amid geopolitical swings

Gold prices rebounded as the US real yield fell two basis points to 2.068%.
The US Dollar Index (DXY), which tracks the dollar against six currencies, is up more than 0.34% to 107.00, near weekly highs.
US S&P Global PMIs for November showed gains, with the Services PMI rising to 57.0 and the Composite PMI rising to 55.3, both up from the previous month. The manufacturing PMI increased from 48.5 to 48.8, which is in line with expectations.
The University of Michigan’s consumer sentiment index improved in November from 70.5 to 71.8, but was worse than forecast. Meanwhile, as expected, annual inflation expectations fell slightly from 2.7% to 2.6%.
According to data from the Chicago Board of Trade included in the December federal funds futures contract, investors are pricing in a 22 basis point interest rate cut by the Federal Reserve by the end of 2024.

Technical Outlook: Buyers expect the gold price to be around $2,800

The gold rally will continue, with prices looking to break the $2,750 mark again. The yellow metal breached its 50-day basic moving average (SMA) of $2,663 on Thursday, prompting buyers to push up XAU/USD spot prices.

In such conditions, if the gold price reaches $2,750, the next all-time high would be $2,790. A breach of the latter will reveal the $2,800 figure and pave the way for a test of $3,000, which Goldman Sachs sees as the next major resistance.

On the other hand, if XAU/USD falls below $2,700, the unprofitable metal could start trading in the $2,650 to $2,700 range unless the bears break the November 14 low of $2,536 and then $2,500.

The Relative Strength Index (RSI) has turned bullish, indicating that buyers are in control.