Gold Price Forecast: XAU/USD gains traction above $2,000 as dovish Fed comments weaken US Dollar

• Gold price holds positive ground around $2,020 after the key US event.
• The Federal Reserve (Fed) policy decision matched market expectations at its December meeting by maintaining the rate unchanged at 5.25%–5.50%.
• The annual Producer Price Index (PPI) ex Food & Energy arrived at 2.2% YoY vs. 2.3% prior.
• Gold traders await the weekly Jobless Claims and Retail Sales reports, due later on Thursday.

Gold price (XAU/USD) surges above $2,000 during the early Asian session on Thursday. The weaker US Dollar (USD) and Treasury yield after the Federal Reserve (Fed) meeting boost the yellow metal. At press time, the gold price is trading at $2,020, up 0.16% 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, drops sharply from 103.95 to 102.90. The Treasury yields edge lower, with the 10-year yield falling to 4.02%, the lowest level since August.

The Fed policy decision matched market expectations at its last meeting of the year by maintaining the interest rate unchanged at 5.25%–5.50%. The statement was dovish on monetary policy guidance, and the Fed Chair Jerome Powell did not make much of an effort to push back against market expectations of early rate cuts. During the press conference, Powell said that the Fed is willing to cut rates even if the U.S. economy doesn’t dip into a recession in 2024.

The Fed indicated the possibility of three rate cuts by three-quarters of a percentage point in 2024. However, the fed funds futures were pricing in 1.5 percentage points of the rate cut in the next years, according to the CME FedWatch Tool.

About the data, the US Producer Price Index (PPI) for November came in at 0% MoM from a 0.4% drop in the previous reading, while the annual PPI fell 0.9% versus a 1.2% rise prior. The annual PPI ex Food & Energy eased from 2.3% to 2.0% YoY. The headline and core PPI figures came in worse than market expectations, the US Bureau of Labor Statistics showed on Wednesday.

Gold traders will take more cues from the US economic data, including the weekly Jobless Claims and Retail Sales reports. The Retail Sales figure is estimated to drop by 0.1% MoM in November. Chinese Retail Sales and Industrial Production data will be released on Friday.