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Gold (XAU/USD) advances during the North American session on Friday, poised to finish the week almost flat above the $4,200 figure as market participants brace for the Federal Reserve (Fed) monetary policy meeting next week. At the time of writing, XAU/USD trades at $4,216 after bouncing off daily highs of $4,259.

XAU/USD trades flat; markets eye Federal Reserve’s expected rate cut

The week ends with the release of the Fed’s preferred inflation gauge, the Core Personal Consumption Expenditures (PCE) Price Index for September, which remained virtually unchanged, slightly closer to the 3% threshold than the Fed’s 2% goal. Although the print would justify a Fed hold, jobs data showing a cooling labor market and dovish comments by Federal Reserve officials suggest that a rate cut is most likely.

Recently, the University of Michigan revealed that American consumers grew slightly optimistic regarding the outlook of the economy. Worth noting that inflation expectations dipped, even though there is growing speculation that the impact of tariffs is yet to be felt.

On Thursday, a Reuters poll revealed that economists had priced in the December rate cut, a green light for Gold price to extend its rally.

As of writing, the CME's FedWatch tool indicates an 87.2% probability of a 0.25% reduction next week.

Daily market movers: Gold firms as US Treasury yields climb

• The US Dollar Index (DXY), which tracks the American’s currency performance against other six, is virtually unchanged at 98.93.
• The US 10-year Treasury note yield is up nearly four basis points, up to 4.141%. US real yields, which correlate inversely with Gold prices, are also rising two bps to 1.881%, a headwind for Bullion.
• The Core Personal Consumption Expenditures (PCE) Price Index — the Federal Reserve’s preferred inflation measure excluding food and energy — rose 0.2% MoM in September, matching August’s pace and market estimates. On a yearly basis, core PCE eased from 2.9% to 2.8%, reinforcing the view that underlying inflation continues to cool gradually.
• The University of Michigan Consumer Sentiment index for December improved to 53.3, topping expectations of 52 and rising from November’s final reading of 51. Survey Director Joanne Hsu noted that “consumers see modest improvements from November on a few dimensions, but the overall tenor of views is broadly somber.”
•  Inflation expectations moderated, with one-year expectations falling from 4.5% to 4.1%, while five-year expectations slipped from 3.4% to 3.2%, signaling a further easing in longer-term price concerns among households.

Technical Analysis: Gold price remains subdued post US Core PCE

Gold’s uptrend remains intact, but price action on Friday suggests that XAU/USD might consolidate within the $4,200-$4,250 range, ahead of the Fed’s meeting. Bullish momentum faded as depicted by the Relative Strength Index (RSI), which favors buyers, but it has turned flattish around the 61.00 level.

A break of the range to the upside clears the path to challenge $4,300 and the all-time high of $4,381. Conversely, a drop below $4,200 would expose initial support at the 20-day Simple Moving Average (SMA) at $4,124, followed by $4,100, and then the 50-day SMA at $4,059.

(Click on image to enlarge)

Gold daily chart

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