Last Friday, gold prices were seen breaking through the weekly high of $2,050 ahead of the holiday weekend and Christmas Day before touching a high of $2,070 earlier in the week yesterday.
Now it opened low again at around $2,055 with movements still influenced by the US dollar which is weakening due to expectations of the Federal Reserve (The Fed) which is seen to be moving towards policy easing next year.
The market is still waiting for The Fed to accelerate in reducing interest rates and lower the US inflation rate to strengthen investors' hopes in 2024.
Based on the latest report, the US Annual Core Personal Expenditure (PCE) Price Index in November recorded an increase of 3.2% compared to last year. It was slightly lower than the market forecast of 3.3% and also decreased further from the previous period of 3.4%.
The drop in US inflation also puts pressure on the value of the US dollar and at the same time raises the price of gold. Expected interest rate cuts by The Fed also have an impact with price changes for both.
The interest rate forecast by the Fed shows a median move of 75 basis points in its cuts until the end of 2024. Markets are now placing an expectation of 160 basis points on interest rate cuts and some analysts are also expecting a cut as early as March next year.
Looking at market conditions in the last week of 2023, the market is likely to see a significant reversal as the US dollar pares its losses and gold eases slightly towards its opening levels.
The market movement for both in early December managed to hit all-time highs and also caused gold's rise to stall somewhat. It needs to fall back to the $2,000 level to help the value of the US dollar grow again.
