Gold Price Forecast: XAU/USD Extends Its Upside Above $2,050, All Eye on US PCE Data

■  Gold price attracts some buyers to $2,055 amid the weaker US Dollar.

■  US Q3 GDP came in weaker than expected, expanding at 4.9%.

■  The markets are pricing in around 79% odds of a rate cut in March.

■  Gold traders await the US Core Personal Consumption Expenditure Price Index (Core PCE), due on Friday.

Gold price (XAU/USD) extends its gains during the early Asian session on Friday. The softer US Dollar (USD) and the downbeat US GDP growth number lends some support to the yellow metal. Gold price currently trades near $2,055, gaining 0.53% on the day.

Meanwhile, the US Dollar Index (DXY), a measure of the value of the USD against a weighted basket of currencies used by US trade partners, has dropped to its lowest level since August, near 101.80. The Treasury yields rose modestly, with the 10-year yield standing at 3.89%.

Data released on Thursdays showed that the US Gross Domestic Product (GDP) for the third quarter came in weaker than expected, expanding at 4.9%, according to the US Bureau of Economic Analysis (BEA) report. Furthermore, Initial claims for unemployment benefits increased by 2,000 to a seasonally adjusted 205,000 for the week ending December 16, worse than the market expectation of 215,000.

Softening US economic data and moderating inflation indicated that the Federal Reserve (Fed) monetary policies are restrictive enough to bring inflation sustainably back to target. Fed committee members expected at least three rate cuts in 2024, and the markets are pricing in around 79% possibility of a rate cut in March, according to the CME FedWatch tool. That being said, the lower US might boost the appeal of gold.

Looking ahead, gold traders will closely monitor November’s US Core Personal Consumption Expenditure Price Index (Core PCE) on Friday. The Fed’s preferred inflation gauge is estimated to show an increase of 0.2% MoM and 3.3% YoY. Furthermore, the University of Michigan Consumer Confidence Survey, Durable Goods Orders report, and New Home Sales data will also be released from the US docket.