Dovish sentiment around the Fed‘s policy pivot gained strength after data from the Commerce Department on Friday showed that the Fed’s preferred inflation gauge, the core Personal Consumption Expenditures (PCE) price index, rose just 0.1% in November and was 3.2% higher than a year ago.
The data sent the US Dollar Index to a fresh five-month low of 101.43, while US Treasury yields challenged multi-month lows, with the benchmark 10-year US Treasury yield currently hovering around 3.85%.
Looking ahead, gold investors will trade with caution as full markets return, but the shortened pre-New Year’s week will continue to see muted volumes. Thin liquidity conditions could leave gold subject to intense volatility. In the U.S., Wednesday will see the low-impact Richmond Fed Manufacturing Index, with all eyes on Wall Street sentiment.
Technically, nothing seems to have changed for gold as the path of least resistance remains to the upside.
The 14-day Relative Strength Index (RSI) continues to hold above its mid-lines, supporting the bullish potential. However, the recent downward slope on the RSI indicator suggests that the pullback in gold prices may extend towards the 21-day simple moving average (SMA) at $2,032. Before that, the $2,050 round number will challenge the bullish commitment.
On the upside, a sustained break above the rising trendline resistance at $2,079 is needed to resume recovery momentum towards the $2,100 psychological level. Further up, gold buyers would target the all-time highs at $2,144.
