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Gold Hovers Near 7-Month High; EUR/USD Set to Face Increased Volatility

By OctaMarket OverviewNov 30, 2023 05:12AM ET
www.investing.com/analysis/gold-hovers-near-7month-high-eurusd-set-to-face-increased-volatility-200644014
Gold Hovers Near 7-Month High; EUR/USD Set to Face Increased Volatility
By Octa   |  Nov 30, 2023 05:12AM ET
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Gold Hovers Near a 7-Month High as the Market Awaits U.S. Inflation Report

The gold (XAU) price remained stable within a narrow range on Wednesday, close to a seven-month high, even though the U.S. Gross Domestic Product (GDP) numbers were higher than expected.

A second estimate of the U.S. GDP Growth Rate revealed that the U.S. economy expanded by 5.2% in Q3, exceeding the initial estimate of 4.9%. The data slightly slowed the bullish trend in XAU/USD but didn't reverse it, as most market participants continue to believe that the Federal Reserve (Fed) is about to turn dovish. Indeed, Fed officials hinted at a potential rate cut in the upcoming months as they anticipate a slowdown in the economy's growth and a continued easing of inflation. The dovish Fed pushed U.S. Treasury yields down to a 2.5-month low of 4.221%. Lower interest rates diminish the opportunity cost of holding bullion. Also, gold became more affordable for holders of other currencies as the US Dollar Index hovered near three-month lows. In November, DXY is on track to record its worst monthly performance in a year.

XAU/USD declined during the Asian and early European trading sessions. Investors are awaiting an important Personal Consumption Expenditure (PCE) report to evaluate the possibility of interest rate cuts in the U.S. If core PCE numbers are lower than expected, XAU/USD may rise above 2,052. However, if the data exceeds expectations, the bullish trend in gold may reverse.

"Spot gold still targets a range of $2,059–$2,069 per ounce, driven by a powerful wave 3," said Reuters analyst Wang Tao.

EUR/USD Will Face Increased Volatility Due to the Release of Important Reports

The euro (EUR) lost 0.20% on Wednesday as the US dollar strengthened slightly following the release of a better-than-expected U.S. Gross Domestic Production (GDP) report.

However, some market participants believe that the GDP estimate for Q3 is a lagging indicator and was a 'non-event'. They consider the decline in EUR/USD to be caused by technical factors.

"Given how sharply the dollar has sold off the last few weeks, it's only natural that we could be seeing a bit of profit taking," said Paresh Upadhyaya, the Director of Currency Strategy at Amundi U.S.

Still, the euro was also pressured by inflation data from Germany, which showed the price growth slowed from 3% year-on-year in October to 2.3% in November. Also, inflation in Spain slowed sharply.

EUR/USD was essentially flat during the Asian and early European sessions. Today, traders should prepare for increased volatility as two inflation reports impacting the pair are coming out. Eurostat will publish the eurozone Harmonised Index of Consumer Price report at 10:00 a.m. UTC. Lower-than-expected figures may push EUR/USD towards 1.09400. Also, the U.S. Bureau of Economic Analysis will release a Personal Consumption Expenditure Price Index report at 1:30 p.m. If the index numbers exceed expectations, the US Dollar Index (DXY) will rise sharply, potentially pushing EUR/USD below 1.09000.

Gold Hovers Near 7-Month High; EUR/USD Set to Face Increased Volatility
 

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Gold Hovers Near 7-Month High; EUR/USD Set to Face Increased Volatility

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