Gold remains below $4,250 barrier as traders await US PCE data for directional impetus

Gold (XAU/USD) held on to its modest intraday gains during the first half of the European session on Friday, although it lacks bullish conviction and remains confined to the weekly range. The US dollar is struggling to capitalize on the previous day’s rebound from its lowest level since late October and is attracting new sellers amid a dovish outlook from the Federal Reserve. This in turn is seen as a major factor driving flows into the non-yielding yellow metal.

Moreover, the cautious market mood and ongoing geopolitical uncertainties stemming from the long war between Russia and Ukraine are providing additional support to safe-haven gold. However, XAU/USD bulls appear to be hesitant and are choosing to wait for the release of the September PCE price index before placing new bets. The data will provide signals on the path of Fed rate cuts and provide new momentum for the commodity.

Daily summary of market drivers: Gold looks to the US PCE price index for some useful momentum

• Global staffing firm Challenger, Gray & Christmas said planned job cuts fell 53%, to 71,321 in November, from 153,074 the previous month, the highest October level since 2003. Separately, the US Labor Department reported that initial jobless claims fell to 191,000 in the week ending November 29, the lowest level in more than three years.
• Despite upbeat reports on the labor market, traders still expect a greater than 85% probability that the US Federal Reserve will cut interest rates by 25 basis points at its next policy meeting next week. This in turn failed to help the US dollar build on Thursday’s modest recovery move and continues to act as a tailwind for non-yielding gold during the Asian session on Friday.
• Russian President Vladimir Putin said on Thursday that some of the proposals contained in the US plan to end the war in Ukraine were unacceptable, indicating that an agreement was still a long way off. Moreover, Putin once again warned that Ukrainian forces must withdraw from the Donbas region or else Russia will seize it. This keeps geopolitical risks at bay and turns into another factor supporting the commodity.
• Market participants are now looking forward to the US PCE Price Index for September. The headline reading is expected to show that annual inflation in the United States rose to 2.8% from 2.7% in August. Meanwhile, the core personal consumption expenditures price index – seen as the Fed’s preferred measure of inflation – is expected to remain steady at 2.9% year-on-year during the month.
• However, important data will be closely scrutinized for further signals about the path of future interest rate cuts by the Fed. This will drive demand for the US dollar and provide new directional momentum for the commodity. Meanwhile, a mixed fundamental backdrop calls for caution before placing aggressive bets on the XAU/USD pair, which looks set to post modest weekly losses.

Gold needs to break the weekly range before the next phase of the directional movement

Any upside momentum may continue to face some resistance near the $4245-4250 area amid mixed technical oscillators on the hourly/daily charts. The next relevant hurdle is near the $4,277-4,278 area, above which the gold price could aim to reclaim the full $4,300 figure. Sustained strength beyond the latter will be seen as a major catalyst for the XAU/USD rally and paves the way for additional gains in the near term.

On the flip side, declines towards the weekly low, around the $4164-4163 area, may still be viewed as a buying opportunity and remain limited. However, a convincing break below could trigger a technical sell-off and leave the gold price vulnerable to testing the $4,100-4,090 confluence zone. The latter includes the 200-period Exponential Moving Average (EMA) on the 4-hours chart and an uptrend line extending from late October, which in turn should serve as a strong base for the XAU/USD pair.