Gold consolidates holding above the $2,150 level.
The gold price (XAUUSD) attracts some dip buying during the Asian session on Wednesday. Reversing a portion of the previous day’s profit taking decline to the $2,150 level, or the weekly low.
Despite the warmer US CPI news, June Fed rate drop predictions are undermining the dollar.
US Treasury bond yields rose on Tuesday. After US consumer inflation for February came in somewhat higher than predicted. Boosting the US Dollar (USD) and exerting negative pressure on the commodities. Also, an expansion of euphoric run in the US equities markets has contributed to a shift away from the safe-haven precious metal.
However, markets continue to price in a higher likelihood. That the Federal Reserve (Fed) would begin decreasing interest rates at its June policy meeting. This keeps US bond yields and the Greenback under control. Limiting the negative risk to the nonyielding Gold price.
Geopolitical threats from Middle Eastern conflicts provide further support.
Traders also appear hesitant to take significant bearish bets on the safe-haven XAUUSD. Citing geopolitical dangers and expectations that the global economy will weaken in 2024. Investors may also opt to remain on the sidelines ahead of the critical FOMC monetary policy meeting next week.
Daily Market Movers: Gold price gains support from June Fed rate decrease.
Bets, Geopolitical Risks
On Tuesday, a strong US inflation report fueled anticipation. That the Federal Reserve may postpone interest rate cuts. Pushing US Treasury bond yields higher, supporting the US Dollar and dragging on the gold price.
The headline The US Consumer Price Index (CPI) increased by 3.2% YoY in February, up from 3.1% the previous month and as expected, while the annual Core CPI came in at 3.8%, slightly higher than expectations of 3.7%.
According to the CME Group’s FedWatch tool, markets continue to price in a 70% possibility that the US central bank will lower interest rates in June, capping the USD and limiting losses in the XAU/USD.
A Qatari official stated on Tuesday that Israel and Hamas are Despite weeks of truce discussions, there is still no agreement to end the violence in Gaza and rescue hostages, and the situation remains extremely delicate.
Iran-aligned Houthi rebels in Yemen have announced that they will increase their military actions during the Muslim holy month of Ramadan in solidarity with Palestinians and in reaction to the ongoing conflict in Gaza.
In response to the Houthis’ firing of two anti-ship ballistic missiles into the Red Sea, the US launched six self-defense strikes, destroying an autonomous underwater craft and 18 anti-ship missiles.
This should help limit the fall for the safe-haven precious metal, as traders await next week’s highly anticipated FOMC meeting for clues on the rate-cut path before putting new directional bets.
