The financial markets have been buzzing recently, especially concerning the movements of spot gold. Traders and investors are keeping a close watch on the fluctuations of this precious metal. As of Friday, December 20th, the gold price showed slight volatility, hovering around $2593.38 per ounce. This followed a tumultuous trading session on Thursday where gold experienced a reversal, despite peaking briefly at $2626.33 before settling down below the critical psychological level of $2600 at a closing price of $2594.28.

Economic indicators from the United States have played a crucial role in shaping investor sentiment. Reports indicated that the U.S. economy grew at a faster pace than anticipated in the third quarter, with significant declines in jobless claims observed. Specifically, the number of Americans applying for unemployment benefits fell by 22,000 last week, reversing the upward trend from previous weeks. This suggests that the labor market, while slowing, remains resilient.

According to the Bureau of Economic Analysis, the final revision of the Gross Domestic Product (GDP) for the third quarter was increased to an annualized growth rate of 3.1%, up from the previous estimate of 2.8%. Initial forecasts had predicted no change in the GDP data. The updated report highlighted a boost in consumer spending and a reduction in the trade deficit, overshadowing any adverse impacts from inventory build-up. Economic growth for the April to June quarter was also revised to 3.0%, showcasing a robust economic climate.

Economists noted that consumer spending, which constitutes more than two-thirds of economic activity, saw an upward revision to a growth rate of 3.7%, marking the fastest rate in a year and a half, surpassing the previous figure of 3.5%. This data reaffirms a sturdy economy and inflation risks that bolster the Federal Reserve's cautious stance, traditionally unfavorable for non-yielding assets like gold.

The dollar index, which measures the greenback against six major currencies, surged during Thursday’s trading, peaking at 108.480, surpassing the previous session's high of 108.180, thereby reaching its highest level since November 2022. The index closed at 108.42, reflecting a modest increase of approximately 0.15%.

In the backdrop of these developments, several central banks conducted their final policy meetings of 2024. The Bank of Japan maintained its interest rates as expected, while the Bank of England held its rate steady at 4.75%. Analysts posited that the major focus is on policy decisions across central banks, which tend to favor the dollar overall, especially given the Fed's hawkish rate cuts contrasted with Japan’s neutral approach.

Some experts highlighted that while U.S. interest rate expectations have risen, they have significantly declined in other regions, such as the European Central Bank and most other central banks. This dynamic has fostered a stronger dollar, with widening rate differentials favoring the U.S. Markets should brace for further dollar strength, as the implications of tariffs have yet to be fully absorbed, they argue.

On Thursday, U.S. 10-year Treasury yields reached 4.594%, the highest levels since May, before slightly retreating to close up 7.6 basis points at 4.574%. An increase in yields by over eleven basis points earlier in the week drew attention, showcasing volatility within the bond market.

However, some analysts expressed caution regarding this volatility, suggesting signs of being somewhat oversold leading up to Friday’s core Personal Consumption Expenditures (PCE) price index data release. They have noted a notable rise in yields since early December, reflecting a sharp upward trajectory. Predictions indicate a potential pullback, possibly revisiting levels near 4.30%.

Futures markets anticipate that the U.S. may only see a 37 basis point cut in interest rates by 2025, suggesting only one or two rate cuts. The earliest speculated cut is projected for the June meeting, with a probability of 65%, while January’s meeting shows a mere 8.6% possibility for a cut.

In anticipation of the core PCE data release on Friday, which is the Federal Reserve's preferred measure of inflation, market participants are eager to glean insights regarding the economic outlook. Current projections suggest that both the overall and core PCE price indices increased by 0.2% in November, with year-on-year increases estimated at 2.5% and 2.9%, compared to the previous values of 2.3% and 2.8%. These expectations may serve to continue suppressing gold prices in the near term.

From a technical perspective, gold prices closed beneath the 100-day moving average and the $2600 mark for two consecutive days, indicating strong selling pressure above that threshold. The MACD and KDJ indicators reflect bearish momentum, highlighting the potential for further declines. A primary target for prices may be set at the recent low of $2536.68 on November 14th, with longer-term targets aiming toward the 200-day moving average currently positioned around $2471.97.

Nevertheless, Thursday saw some increase in gold prices, with support emerging around the $2580 level from bargain hunters. Short-term dynamics could allow for potential rebounds, though resistance remains near the $2600 level, with the 100-day moving average offering additional resistance at around $2606.98; the 5-day moving average may provide further resistance near $2614.40. A close above these levels would be required to lessen the bearish signals going forward.

As of 07:53 Beijing time, spot gold is priced at $2592.51 per ounce. In this complex market environment, investors are eagerly awaiting the core PCE data release, which acts as a pivotal key to deciphering the circumstances surrounding gold pricing. Should the actual figures meet or exceed expectations, it would further affirm the resilience of U.S. inflation and extend the Federal Reserve's cautious stance, making it increasingly difficult to reverse gold's waning momentum.