Here is the XAUUSD update for today, December 20, 2023. Gold prices (XAU/USD) are experiencing a bullish consolidation on Wednesday, trading within a narrow range below the previous weekly peak. Several Federal Reserve officials are trying to temper speculation of an early rate cut in 2024. The strengthening US Dollar and risk-on sentiment are acting as headwinds for the safe-haven gold.
 
Investors remain confident that the US central bank will shift its hawkish stance, anticipating a potential rate cut early in March next year. This keeps US Treasury yields and the USD near recent lows, supporting the non-yielding gold price. Traders are waiting for US inflation data on Friday before making any decisions.
 
The Core PCE index will influence Fed policy and the short-term direction of gold prices. US economic data on Wednesday, including the Conference Board Consumer Confidence Index, Existing Home Sales, and remarks from Chicago Fed President Austan Goolsbee, could provide some impetus.
 
Daily Market Summary: Gold prices struggle to extend gains over the past two days.
 
  1. Market acceptance that the Federal Reserve (Fed) will shift its hawkish stance early next year continues to support gold prices.
  2. Chicago Fed President Austan Goolsbee stated the central bank's non-commitment to cutting rates immediately, emphasizing that it should not be swayed by market desires.
  3. Cleveland Fed President Loretta Mester noted that financial markets are progressing slightly faster than the central bank regarding expectations for a rate cut next year.
  4. The market is pricing in over a 60% chance of a Fed rate cut in March 2024 and a total reduction of 140 basis points in 2024.
  5. The US 10-year Treasury yield weakened below 4%, and the US Dollar is near multi-month lows from last week.
  6. The global risk-on rally remains undeterred amid expectations of a US rate cut, further stimulus from China, and a dovish Bank of Japan, limiting the appeal of safe-haven metals.
  7. Traders are anticipating the US Consumer Confidence Index on Wednesday, but the focus remains on the US PCE Price Index release on Friday.
FAQ on the Federal Reserve
 
How Does Federal Reserve Policy Affect the US Dollar?
 
The Federal Reserve (Fed) shapes US monetary policy with two primary mandates: achieving price stability and promoting full employment. One of its main tools is adjusting interest rates.
 
If inflation exceeds the 2% target, the Fed raises interest rates, strengthening the US Dollar as the country becomes more attractive to international investors. Conversely, if inflation is low or unemployment is high, the Fed may lower interest rates to stimulate borrowing, potentially weakening the US Dollar.
 
How Often Is Fed Monetary Policy Evaluated?
 
The Federal Reserve (Fed) holds eight policy meetings annually through the Federal Open Market Committee (FOMC). In these meetings, the FOMC assesses economic conditions and makes monetary policy decisions. The FOMC consists of twelve Fed officials, including seven Board of Governors members, the president of the Federal Reserve Bank in New York, and four rotating regional Reserve Bank presidents.
 
What Is Quantitative Easing (QE) and How Does It Affect the USD?
 
In urgent situations, the Federal Reserve may implement a policy called Quantitative Easing (QE). QE is a measure where the Fed significantly increases the flow of credit into the struggling financial system.
 
This is a non-standard policy action typically used during crises or when inflation is very low, such as during the Great Financial Crisis in 2008. Under QE, the Fed prints more Dollars and uses them to purchase high-quality bonds from financial institutions. This practice generally weakens the value of the US Dollar.
 
Disclaimer!
 
This analysis on "XAUUSD Today: December 20, 2023 - Gold’s Climax" is based on both fundamental and technical insights from trusted sources and does not constitute advice or a call to action. Please note that this content aims to enrich readers' information. Always conduct your research before using any forex information as a trading reference.
 
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