Gold price rises during the Asian session, despite a lack of follow through buying.
During the Asian session on Tuesday, the gold price (XAUUSD) finds some buyers and pulls away from a three-week low, around the $1,976-1,975 range recorded the previous day. The upswing, however, indicates optimistic sentiment as traders anticipate the release of the latest consumer inflation numbers from the United Kingdom. The United States (US) for greater clarification on when the Federal Reserve (Fed) might start decreasing rates. This, in turn, should provide the US Dollar (USD) some impetus and impact the precious metal.
Geopolitical risk, as well as a slight decline in the value of the US dollar, turn out to be crucial elements offering support.
The market’s attention, however, remains fixed on the result of Wednesday’s highly anticipated two day FOMC monetary policy meeting. The so-called “dot plot” could provide new clues about the Fed’s near term policy stance and aid in determining the next leg of the non yielding Gold price’s directional move. Meanwhile, rising tensions between the US and Iran-backed Houthi rebels in Yemen. Combined with a minor USD decline, appear to be a crucial factor supporting the safe-haven precious metal.
Daily Market Movers: In the midst of geopolitical turmoil, the gold price receives some refuge flows.
On Tuesday, a US defense official reported that Iran-backed Houthi rebels in Yemen fired a land-based cruise missile. Which is perceived as supporting the safe-haven Gold price.
The positive US job data announced on Friday prompted traders to speculate. That the Federal Reserve may wait until May to begin a series of interest-rate decreases next year. Which would act as a headwind.
According to a New York Fed survey released on Monday. Respondents expect inflation to be 3.4% a year from now, down from 3.6% in October and the lowest number since April 2021.
The new figures fueled expectations that inflation could continue to fall without the country entering a recession. and led investors to lower their expectations for the first Fed rate drop in March 2024.
Market participants, on the other hand, appear convinced that the US central bank has completed its policy tightening campaign and will begin to ease monetary policy in the first half of next year.
According to the CME Group’s FedWatch Tool, investors continue to price in a March rate decrease of at least 25 basis points (bps) and a roughly 75% possibility of such a move in May 2024.
As a result, the US Dollar is unable to capitalize on the post-NFP upward move. Lending support to the non-yielding metal, albeit bulls appear hesitant ahead of US consumer inflation data.
The headline CPI is likely to rise. to climb by 0.1% in November. With the annual rate slowing to 3.1%. The core gauge is expected to rise from 0.2% to 0.3% MoM and remain stable at 4.0% year on year.
Investors are looking for a fresh boost ahead of the FOMC meeting on Wednesday.
The market’s focus will next shift to the outcome of the FOMC’s two-day monetary policy meeting. Which is slated to be announced during the US session on Wednesday.
