Gold risen following an overnight rebound from a one-month low amid a weaker USD.
The gold price (XAUUSD) rises for the second day in a row on Friday. Recovering further from a one-month low at the $2,013 level. Which corresponds to the previous day’s 50-day Simple Moving Average (SMA). The intraday rally. However, has stalled due to uncertainties over the Federal Reserve’s (Fed) rate-cutting plan. Furthermore, the recent price consolidation in a familiar range demands some caution for bullish traders. And preparing for potential further moves. further gains.
A slightly hotter US CPI, predictions of a March Fed rate drop are undermining the US dollar.
Consumer prices in the United States (US) rose more than expected in December. According to data released on Thursday. This, combined with hawkish sentiments from Fed officials. Fueled anticipation that interest rates could remain higher for a longer period of time. Markets, on the other hand, are pricing in a higher likelihood of a rate decrease in March, which is seen as a drag on US Treasury bond yields. This, in turn, continues to weaken the US Dollar (USD) and should keep the non-yielding Gold price stable.
Geopolitical threats and China’s economic troubles help the safe-haven XAUUSD even more.
Aside from that, escalating geopolitical tensions in the Middle East, as well as persisting concerns over a fragile Chinese economic recovery, appear to be contributing to the precious metal’s safe-haven status. Despite the above highlighted positive fundamental, In the meantime, the gold price remains trapped in a multi-day trading range. As a result, it is wise to wait for substantial follow-through buying before preparing for any meaningful XAUUSD appreciation.
Daily Market Movers: Gold price attracts shelter funds amid rising geopolitical concerns.
The mixed US consumer inflation data increased hopes that the Federal Reserve will delay a much-anticipated rate drop in March, dragging gold to a one-month low on Thursday.
The subject line The US CPI increased from 3.1% to 3.4% year on year in December, but the core index (excluding volatile food and energy costs) saw its weakest yearly rise since May 2021.
Loretta Mester, President of the Cleveland Fed, remarked on the newest CPI numbers, predicting that it will be higher. It is too soon for the Federal Reserve of the United States to lower interest rates at its March policy meeting.
In addition, Richmond Fed President Tom Barkin stated that the central bank must be confident that inflation is on course to reach 2% before it will be willing to lower interest rates.
Separately, Chicago Fed President Austan Goolsbee stated that the central bank is still on a comfortable path forward in terms of inflation and that as inflation continues to fall, the central bank will have to examine policy restrictiveness.
According to the CME group’s FedWatch Tool, markets are still pricing in a rate decrease in March, which is considered as a positive for the non-yielding yellow metal.
The return on the 10-year benchmark The yield on US government bonds remains below the 4.0% level. Putting US Dollar bulls on the defensive and benefiting the non-yielding metal.
In response to drone and missile strikes on ships in the Red Sea. US and UK troops carried out attacks against several Houthi targets, heightening the prospect of further escalation of geopolitical tensions.
Attacks on Houthi sites in Yemen.
Following attacks on Houthi sites in Yemen. US President Joe Biden stated that the US will not hesitate to take additional measures.
In addition, UK Prime Minister Rishi Sunak stated that Britain will always advocate for free navigation and trade.
The Chinese inflation numbers revealed last Friday exacerbate deflationary risks. While a 0.3% drop in imports in 2023 indicated that to lackluster domestic demand and raised concerns about a slow economic rebound.
The XAUUSD is set to finish in the negative for the second week in a row. As traders await the US Producer Price Index. And Minneapolis Fed President Neel Kashkari’s speech for new impetus.
