Jump to content

Gold Prices Drop With Breakeven Rates After Biden Agenda Stalls. PCE Data Eyed


Recommended Posts




  • Gold prices take a hit after President Biden’s agenda stalled out
  • PCE data shifts into focus as falling breakeven rates drag gold
  • Prices drop below the 200-day Simple Moving Average overnight
Gold Prices Drop With Breakeven Rates After Biden Agenda Stalls. PCE Data  Eyed

Gold prices fell overnight despite a risk-averse trading environment and a relatively weak US Dollar after Omicron fears resurfaced. Bullion prices have struggled below the 1800 mark this month and fell as low as 1753.10, a far cry from November when the yellow metal aimed at the 1900 level.

The Federal Reserve’s recent shift to a more hawkish outlook has the prospect of higher rates casting a bearish tone on the precious metal. Specifically, a forecasted pullback in global monetary support overall has gold traders on the back foot. The sustained rise in prices across key parts of the economy has bolstered the pace of those coming rate hikes. Last week, the Bank of England (BoE) hiked its benchmark rate to 0.25% from 0.1%, making it the first major central bank outside the APAC region to hike.

While inflation is strong, markets now appear to believe that prices will level off in the coming years. The US 2-year breakeven rate fell overnight after President Joe Biden’s social spending agenda was effectively ended by Senator Joe Manchin – a moderate who offers a vital vote for Democrats. Mr. Manchin said he will not support the Build Back Better plan (BBB) for now.

The proposed legislation may come back to life again, but for now, it appears to be effectively dead. Traders will continue to keep their ear to the ground over issues that may stoke or cull inflation in the short term. That said, if the legislation is reintroduced in the coming months, it may underpin breakeven rates and, in turn, gold prices. Goldman Sachs released a note overnight stating that the expected Q1’22 US GDP is expected at 2.0% with the removal of the BBB. That is down from 3.0%.

For now, however, bullion traders have US inflation data due out later this week in focus. The November core personal consumption expenditures price index is set to cross the wires at 4.5% y/y. A higher-than-expected figure may firm up near-term inflation expectations, which could underpin gold. But even if that does occur, don’t expect a huge turn higher in breakeven rates or gold, as the market appears rather confident in central banks at the current moment.


Gold Prices Drop With Breakeven Rates After Biden Agenda Stalls. PCE Data Eyed

Economic Calendar


Gold pierced back below the 200-day Simple Moving Average (SMA) in an overnight drop. The 1800 level continued to beat down intraday attempts to clear the psychologically imposing level. The path lower now looks to be the path of least resistance below the key SMA, with a possible drop to the November low at 1758.93 on the cards.


xau-usd chart, gld

Chart created with TradingView


Written by Thomas Westwater, Analyst for DailyFX.com. 21st December 2021.

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • General Statistics

    • Total Topics
    • Total Posts
    • Total Members
    • Most Online
      10/06/21 10:53

    Newest Member
    Joined 07/06/23 19:48
  • Posts

    • Look Ahead to 8/6/23: eurozone, Japan growth; US initial jobless claims; Crest Nicholson, MITIE earnings Growth is in focus as investors await eurozone and Japan GDP data, plus keep an eye out for US initial jobless claims ahead of the Fed monetary policy meeting next week. Crest Nicholson and MITIE post results. Angeline Ong | Presenter, Analyst and Content Editor, London | Publication date: Wednesday 07 June 2023              
    • With the price of Brent having failed between $77.50 and $78.50 three consecutive times in the past month, we will go short at $76.70 with a downside target at $72.00 and a stop-loss at $78.55 on a daily chart closing basis. Axel Rudolph FSTA | Senior Financial Analyst, London | Publication date: Wednesday 07 June 2023
    • Charting the Markets: 07 June Indices grind higher. EUR/USD, GBP/USD and USD/CAD struggle to make headway. And WTI and gold trade in low volatility while wheat slips back. Axel Rudolph FSTA | Senior Financial Analyst, London | Publication date: Wednesday 07 June 2023                       This is here for you to catch up but if you have any ideas on markets or events you want us to relay to the TV team we’re more than happy to.
  • Create New...