Gold holds strength despite higher US yields, geopolitical tensions escalate

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• Gold price remains sideways as the US core PCE inflation reading was in line with estimates.
• The downside in the Gold price remains cushioned by escalating tensions in the Israel-Palestine conflict.
• US Yellen sees Treasury yields elevated on Fed’s “higher for longer” interest rates outlook.

Gold price (XAU/USD) trades in a tight range around $1,990 as the downside is cushioned by escalating Middle East tensions while the upside is limited by more upbeat US economic data, namely robust Q3 Gross Domestic Product (GDP) and Durable Goods Orders. The precious metal failed to deliver a decisive action despite the release of the sticky Core Personal Consumption Expenditure (PCE) inflation data.

The US Bureau of Economic Analysis (BEA) reported that Monthly core PCE inflation grew by 0.3% in September as expected by the market participants against the 0.1% growth recorded in August. On an annual basis, core PCE inflation rose by 3.7% as forecasted but remained lower than the 3.9% increase in August.

A sticky Fed’s preferred inflation gauge seems insufficient to dent expectations of a steady interest rate decision from the Federal Reserve (Fed)in its upcoming monetary policy meeting, scheduled for November 1 as US long-term bond yields are significantly higher.

The US Dollar and long-term bond yields recovered sharply after blockbuster GDP numbers as the data shows resilience in the US economy. The phenomenal GDP growth aligns with the “soft landing” scenario envisaged by the Fed in its battle against stubborn inflation. Still, the upside in the Gold price could remain restricted as US Treasury yields may remain elevated for a long amid the Fed’s “higher for longer interest rates” plot. 

Daily Digest Market Movers: Gold price strives for a direction

• Gold price consolidates around $1,990.00 as Israel-Palestine tensions continue to provide a cushion.
• The Israeli army entered Gaza briefly to carry out a ground raid. Furthermore, a senior official of Hamas has urged allies to intervene in the ongoing conflict to defend Gaza from a full-scale invasion from Israeli troops.
• The risks of Iran-backed Hezbollah’s intervention in the Israel-Palestine war persist as Western nations have been supporting Israel.
• Gold price faced selling pressure near $1,990.00 on Thursday after upbeat US GDP and Durable Goods Orders data, but managed to firm amid geopolitical tensions.
• The US BEA reported that the US economy grew at a stronger pace of 4.9% in the July-September quarter on an annualized basis, against expectations of 4.2% growth and doubling the 2.1% rate seen in the second quarter. 
• US economic strength in the third quarter was driven by robust consumer spending amid a tight labor market, rising residential investment, and high government spending. 
• Consumer spending grew by 4% in the July-September quarter against a 0.8% reading in the second quarter. 
• Still, the US GDP report showed that business investment contracted for the first time in two years as firms postponed capacity expansion due to higher borrowing costs. Firms relied on inventory backlog and achieving efficiency to cater to households’ demand.
• US Durable Goods Orders data for September, also released on Thursday, pointed to sharply increasing demand ahead for the US manufacturing sector.
• New orders for durable goods rose 4.7% against expectations of 1.5%. In August, orders contracted marginally by 0.1%.
• After the release of the GDP data, US Treasury Secretary Janet Yellen said in an interview with Bloomberg that strong GDP numbers point to a “soft landing”, but that these strengths will also keep bond yields elevated.
• Janet Yellen said that high US bond yields reflect strong confidence in the US economy and indicate that interest rates will remain higher for a longer period. 
• The US Dollar Index (DXY) looks set for a positive weekly closing but edges down on Friday from a two-week high of 106.90.  

Technical Analysis: Gold price remains sideways below $1,990

Gold price trades back and forth below the crucial resistance of $1,990.00. The precious metal is trading inside Thursday’s range as investors await the US core PCE reading, which will provide some cues about the Fed’s monetary policy action on November 1. The 20-day Exponential Moving Average (EMA) has crossed the 50-day and 200-day EMAs to the upside, portraying a bullish near-term trend.