gold prices are holding steady in early trading on Friday in Asia as anticipation builds ahead of the US Personal Consumption Expenditures (PCE) Price Index release. The US Dollar is experiencing a rebound from earlier losses, even as Treasury bond yields remain low. The current market conditions suggest gold might face a correction due to extremely overbought signals and numerous month-end transactions.
gold is hovering near its historic peak of $2,686, with market participants taking a pause to consolidate their recent weekly gains ahead of the key economic report due later today. Although recent comments from Federal Reserve officials have leaned dovish and US economic data has been mixed, expectations for a substantial interest rate cut of 50 basis points in November have softened. According to current market estimates, the likelihood of such a move has decreased to 50%, down from 62% just a day earlier.
The diminished prospects for significant rate cuts at the Fed’s next meeting appear to support a recovery in the US Dollar, hindering gold ’s upward momentum. Nevertheless, remarks from Fed officials along with positive Chinese stimulus measures have somewhat capped the possible decline in gold prices. The forthcoming core PCE Price Index—an important inflation indicator—will significantly influence market sentiment and expectations regarding future Fed actions.
If the core PCE data exceeds expectations, it may dampen enthusiasm for a November rate cut, likely resulting in a recovery for the US Dollar and subsequent downward pressure on gold prices. Alternatively, weaker-than-expected core readings could rekindle the notion of an aggressive rate cut, possibly driving gold to new highs. Market reactions to the PCE report may be brief, as the quarter-end financial flows and profit-taking behaviors are anticipated to impact trading activity.
Technically, gold remains in overbought territory. The 14-day Relative Strength Index (RSI) indicates a need for caution among buyers. To sustain upward momentum, gold must overcome the $2,686 high, paving the way for a potential advance to the $2,700 and $2,750 levels. Conversely, any downward movement could test the September 24 low of $2,623, with the possibility of falling to $2,600 or even $2,585 if selling pressure increases.
