International gold prices fluctuated within a narrow range in quiet trading on Friday (Dec. 23), as cautious traders waited for the upcoming U.S. PCE data later in the day to weigh the prospect of the Federal Reserve raising interest rates. With low market liquidity ahead of the Christmas holiday, less dramatic news also tends to spark strong moves.
At 15:25 Beijing time, spot gold rose 0.25% to $1,796.91 an ounce; the main COMEX gold futures contract rose 0.51% to $1,804.5 an ounce; the U.S. dollar index fell 0.09% to 104.305.
US November PCE data will be released at 21:30 Beijing time. Gold is considered a hedge against inflation and economic uncertainty, but higher interest rates increase the opportunity cost of holding bullion because it pays no interest.
“Gold will get a boost if the data shows subdued inflation, which could boost expectations for a slowdown in Fed rate hikes,” said Brian Lan, managing director at Singapore-based trader GoldSilver Central. Gold prices will be less volatile next year.
Gold fell more than 1% overnight after U.S. economic data highlighted a faster-than-expected rebound in the country’s economy, boosting the dollar and potentially putting the Federal Reserve on a more aggressive anti-inflation path. Meanwhile, data released overnight also showed that the number of Americans filing new claims for jobless benefits rose less than expected last week.
Jeffrey Sica, CEO of Circle Squared Alternative Investments, said: “The economic data we are seeing suggests that the high interest rate environment is likely to continue for a longer period.” Attracting some money from the stock market, “it’s like driving with the brakes on — gold will go up.”
Ily aSpivak, global head of macro at Tastytlive, said: “Markets are in a state of digestion after yesterday’s data. With low market liquidity ahead of the Christmas holiday, we saw a strong move triggered by a not particularly dramatic news.”
Independent analyst Ross Norman has highlighted the problem of unwinding book positions before the end of the year or setting up new positions ahead of the New Year’s peak. “With so many market participants absent from the holiday season, it’s dangerous to overread gold’s price action now … and thin markets tend to be prone to exaggerated moves in small volumes.”