- Summary:
- Gold has been strengthened by a lower-than-expected US GDP reading for the last quarter of 2023, but the market stays risk-averse for now.
Gold prices have risen during afternoon trading in the European session, propelled by falling yields on US Treasuries and a lower-than-expected US GDP figure. Spot market gold was up by 0.34% and traded for $2037 an ounce, while futures gold was marginally up by +0.04% and was going at $2044 an ounce at press time. The commodity has been bubbling slightly under the 50-SMA level, but could take a decisive trajectory when US PCE data comes out.
The yellow metal remains resilient, amid a reduction in the expected number of US interest rate cuts in 2024. The rise on Wednesday is largely down to a steady decline in yields on 10-year and 5-year bonds. Bonds are traditionally viewed as substitute to gold, especially with respect to hedging inflation. Yields on these assets have declined by 2 basis points as of this writing and have been below the 4.300% mark for most of the last week.
The US Bureau of Economic Analysis released the preliminary GDP reading for the fourth quarter of 2023. The reading came in at 3.2%, falling below the forecast 3.3%, and the Q3 figure of 4.9%. This has weighed down on the dollar, and tilted the scales in favour of gold prices ahead of the PCE release. The US dollar had been on the edge in the hours leading to the GDP announcement, following lower-than-expected Consumer Confidence and Durable Goods Orders readings for February and January respectively.
The XAUUSD pair will now look for more impetus from the U.S. Core Personal Consumption Expenditure (PCE) Price Index and Initial Jobless Claims releases on Thursday. However, gold will likely hang on to marginal gains against the dollar in the intervening time.
Technical analysis
The pivot level for gold price is currently at 2033, and the RSI indicator shows control by the buyers. The bulls will need to stay in control above 2033 to have a shot at breaking the 2038 resistance. Extended control could see them push up further to test 2040. However, if the buying momentum reduces, the pair could test the 2030 support. A break beyond that point will invalidate the upside narrative and establish another support at 2028.
