Gold remains close to the nearly two-month high achieved on Monday, despite mounting Fed rate cut forecasts.
The gold price (XAUUSD) attracts some dip-buyers throughout the Asian session on Tuesday and climbs to the $2,430 range in the last hour, bringing it closer to its best level since May 20 reached the previous day. Investors appear certain that the US central bank will begin its rate-cutting cycle in September, and the bets were reiterated overnight. Jerome Powell, Chairman of the Federal Reserve (Fed), made the following comments. This keeps US Treasury bond yields low, which benefits the non-yielding yellow metal.
The risk on atmosphere, along with slight US dollar strength, may limit the upside for the XAUUSD.
Meanwhile, a botched assassination attempt on leading Republican candidate Donald Trump increased his prospects of winning the 2024 presidential election and fueled hopes for a more relaxed regulatory environment. This increases investors’ desire for riskier assets, which may limit the upside for the safe-haven gold price. Aside from that, slight US Dollar (USD) strength, reinforced by the expectation that Trump’s policies will increase government debt and inflation, could help to keep the XAUUSD under control.
Daily Market Movers: Gold price bulls mostly ignore a minor USD strength and the risk-on mentality.
Federal Reserve Chair Jerome Powell said on Monday that recent inflation statistics increased confidence that price hikes will return to the objective in a sustainable manner.
The US Labor Department revealed last week that the headline CPI fell in June for the first time in more than four years, with the yearly rate slowing to 3% from 3.3% in May.
Powell also stated that the Fed does not anticipate to wait until inflation reaches 2% before moving, implying that rate reduction are not far off and providing some support to the gold price.
The current market pricing shows a higher chance that the Fed will drop borrowing costs in September, with the possibility of another interest rate cut by the end of 2018. year.
Meanwhile, the US Dollar gains traction and pulls away from a three-month low reached on Monday, which may limit the commodity’s further advances.
Aside from that, a continuation of the risk-on rise in global equities markets could help keep the safe-haven XAUUSD under control ahead of US retail sales.
According to average projections, headline sales will remain steady in May. But sales excluding autos predicted to increase by 0.1% during the month.
