Gold Price Forecast: XAU/USD recovers its losses near $2,040, focus on US PMI, Fed’s Powell speech

• Gold price holds positive ground around $2,040, gaining 0.17% in early Friday’s Asian session.
• Both the monthly and annual Core Personal Consumption Expenditures Price Index (Core PCE) increased in line with expectations.
• The futures market is pricing the possibility that the Fed won't raise rates further in its next meetings.

Gold price (XAU/USD) recovers its recent losses near $2,040 during the early Asian session on Friday. The anticipation that the Federal Reserve (Fed) to hold rates steady and perhaps start cutting in 2024 weighs on the US Dollar (USD) and lends some support to the USD-denominated gold.

Meanwhile, the gauge of the value of the USD against a weighted basket of currencies used by US trade partners climbs above 103.50. The Treasury yields edge higher, with the 10-year yield recovering from 4.24% to 4.32%.

The US inflation, as measured by the Personal Consumption Expenditures Price Index, excluding food and energy prices (core PCE) climbed 0.2% MoM and 3.5% YoY in October. Both figures increased in line with expectations, the Commerce Department reported on Thursday.

Additionally, the Labor Department reported that the Initial weekly Jobless Claims rose to 218,000, an increase of 7,000 from the previous period week, below the 220,000 expected. Meanwhile, the Continuing Claims surged to 1.93 million, an increase of 86,000 and the highest level since November 27, 2021.

The futures market is pricing the possibility that the Fed won't raise rates further in its next meetings and will instead begin cutting rates by the spring of next year as the PCE reading, along with signs of a loosening labor market, might reinforce that view. The anticipation of the tighening cycle ending might benefit the yellow metal. That being said, gold tends to rise with lower interest rates, whereas higher interest rates put pressure on the yellow metal.

Looking ahead, the Chinese Caixin Manufacturing PMI for November will be released, which is estimated to rise from 49.5 to 49.8. The weaker data could exert some pressure on the gold price as China is the world's largest gold producer and consumer. Furthermore, the US ISM Manufacturing PMI for November and Fed Chair Jerome Powell’s speech will be closely watched.