• Last Friday’s report of a high Core PCE, the Fed’s gauge for inflation, augmented speculations of rates “higher for longer.”
• US housing data in the United States was mixed, though the markets mainly ignored it.
• XAU/USD Price Forecast: Albeit jumping at the 200-DMA, downside risks remain below $1850.

Gold price is recovering after hitting a new YTD low of $1804.78, rising above the 100-day Exponential Moving Average (EMA). Factors like a mixed sentiment and a soft US Dollar (USD) are tailwinds for the yellow metal, even though there are growing speculations for higher rates in the United States (US). Hence, the XAU/USD is trading at $1827.03, above its opening price by 0.56%.

The jump in Gold prices is courtesy of an offered US Dollar

The financial markets narrative has not changed. Last Friday’s US Core Personal Consumption Expenditure (PCE), the Fed’s preferred gauge for inflation edging higher above expectations and closing to the 5% mark, caused a repricing for the Federal Funds Rate (FFR) terminal rate. Money market futures estimates 25 bps rate increases in March, May, and June, which would drag the FFR to the 5.25% - 5.50% range. Nevertheless, some investors are betting the Fed will ease in Q4 2023.

In the meantime, the US economic docket features housing data. According to the US Federal Housing Finance Agency’s data released on Tuesday, house prices in the US decreased by 0.1% from November to December. The S&P/Case-Shiller Home Price Index for December was also released and showed a year-over-year increase of 4.6%, lower than the previous month’s 6.8% and lower than the 6.1% estimated by analysts.

The US Dollar Index (DXY), a measure of the buck’s value against a basket of peers, has been volatile during Tuesday’s session, at around 104.630. Meanwhile, UST yields, mainly the 10-year benchmark note rate, sit at 3.936% and gains two bps, capping XAU/USD rally towards the $1830 area.