Gold Price Forecast: XAU/USD surge as Fed rate cut expectations weaken US Dollar

• XAU/USD climbs 0.40% amidst a decline in the US Dollar Index and a drop in the 10-year Treasury yield.
• Fed Chair Jerome Powell hints at policy easing in 2023, triggering expectations of over 135 basis points in rate cuts by December 2024, as per CBOT futures.
• Upcoming US economic data, including Q3 GDP and core PCE, to provide further cues for gold's trajectory amid ongoing housing market stability.

Gold price advanced steadily in the mid-North American session on Tuesday as the US Dollar and Treasury yields slumped due to market participants continuing to price in the US Federal Reserve (Fed) would lower borrowing costs next year. At the time of writing, XAU/USD trades at $2045 after hitting a daily low of $2021.84, gains 0.90%.

XAU/USD soars amid speculation of Federal Reserve's policy shift

The US Dollar Index (DXY), which tracks the currency’s performance against six rivals, is down 0.40% at 102.09, while the US 10-year benchmark note rate is at 3.913% at around the last four days' lows.

Last week’s Fed Chair Jerome Powell commented that the tightening cycle ended and opened the door to ease policy next year, with him saying that discussions about rate cuts had begun. Nevertheless, last Friday, the New York Fed President John Williams pushed back and stated that the question is whether monetary policy is sufficiently restrictive or not.

Despite that, money market futures had priced in more than 135 basis points of rate cuts for December of 2024, according to fed funds futures contracts of the Chicago Board of Trade (CBOT). Odds for a rate cut in March lie at 70%.

In the meantime, sources cited by Reuters said, “Investors are buying gold, and there is less incentive for people to get rid of it since the belief is that the Federal Reserve may very well cut interest rates before they achieve their 2% inflation target.”

Data-wise, US housing data revealed earlier was solid but failed to move the needle in favor of the Greenback (USD). In the week ahead, the US economic calendar will get busy with the release of Q3’s GDP final data, followed by Durable Goods Orders, the Fed’s preferred gauge for inflation, the core PCE, and additional housing data.

XAU/USD Price Analysis: Technical outlook

From a technical standpoint, the daily chart suggests the XAU/USD uptrend would continue, though it would need to reclaim the $2050 to pave the way to res-test the previous year-to-date (YTD) high of $2081.82 before challenging $2100. On the flip side, if the non-yielding metal stays below $2050, that would pave the way for consolidation in the $2009-$2050 area. A breach of the bottom of that range could put the $2000 figure into play.