Gold struggled to acquire traction and remains stuck in a limited range.
The gold price (XAUUSD) edged upward during the Asian session on Tuesday, but it failed to sustain the gains and remains near to a one-week low set the day before.
The non-yielding XAUUSD capped by expectations of a less dovish Fed and higher US bond yields.
Traders appear hesitant, preferring to wait for the results of a two-day FOMC meeting on Wednesday before placing new directional wagers on the non-yielding yellow metal. The emphasis will be on the accompanying policy statement, particularly the so-called dot plot, and Fed Chair Jerome Powell’s remarks during the post-meeting press conference. Investors will be looking for clues regarding future rate cuts, which will push the US Dollar (USD) and provide some major impetus to the non-yielding yellow metal.
Heading into the significant event risk, persistent global tensions and concerns about US President-elect Donald Trump’s tariff plans help to maintain the safe-haven gold price. Meanwhile, the possibility of a less dovish Fed, combined with predictions that Trump’s plans will lead to a rise in government borrowing, supports elevated US Treasury bond yields. Aside from that, a bullish risk tone may limit the XAUUSD, requiring prudence before confirming that the recent decline from a one-month high reached last week has run its course.
Daily Market Update:Gold price edged Upward, Traders prefer to wait for further clues regarding the Fed’s rate decrease before putting directional bets.
Data released on Monday revealed that a significant portion of the US economy expanded at the quickest rate in more than three years. In fact, the S&P Global flash US Services Purchase Managers Index (PMI) increased from 56.1 to 58.5 in December, marking the highest level in 38 months.
Furthermore, the Composite PMI rose from 54.9 in November to 56.6, marking a 33-month high. This overshadowed a drop in the flash US Manufacturing PMI to a three-month low of 48.3 in December, reinforcing market expectations for a less dovish Fed.
Investors were persuaded that US President-elect Donald Trump’s policies may exert increasing pressure on inflation, forcing the The Fed will pause its rate-cutting cycle. This increased the yield on the benchmark 10-year US government bond to its highest level since November 22.
According to the CME Group’s FedWatch Tool, markets have completely priced in the Fed’s 25 basis-point rate drop on Wednesday. This keeps US Dollar bulls on the defensive and supports the XAU/USD until Tuesday’s Asian session.
The United States imposed additional sanctions on North Korea and Russia on Monday, targeting Pyongyang’s financial activities and military support for Moscow, according to the Treasury Department. Israel is expected to retaliate to another ballistic missile attack by Yemen’s Houthis.
Geopolitical worries boost the safe-haven precious metal ahead of the FOMC meeting.
Traders now await the release of the US monthly Retail Sales numbers for short-term possibilities Later in the North American session. However, the spotlight will remain on the conclusion of Wednesday’s highly anticipated FOMC policy meeting.
