Gold regained positive momentum, but struggled to maintain it.
The gold price (XAUUSD) fails to capitalize on its intraday bullish advance. Remaining below the $2,040-$2,042 supply zone through the first half of Tuesday’s European session.
Reduced expectations for an early rate cut by the Fed should limit any major appreciation.
Expectations for the first rate decrease by the Federal Reserve (Fed) have been pushed back to May in light of the incoming solid US macro data. Which revealed that the economy is in excellent shape. This is supported by a recent increase in US Treasury bond yields. Which is viewed as a significant headwind for the non-yielding yellow metal.
Geopolitical issues may provide some support for the safe-haven XAUUSD and assist limit losses.
The downside, however, is cushioned by the risk of further escalation of geopolitical tensions in the Middle East. Which tends to support the safe-haven gold price. Furthermore, a minor drop in the US Dollar (USD) to a one-week low, aided by a post-Bank of Japan (BoJ) gain in the Japanese Yen (JPY), could keep the bullion price stable. Traders may also want to wait for this week’s main macro releases the global flash PMIs on Wednesday, followed by the Advance US Q4 GDP and the US Core PCE Price. Index on Thursday and Friday, respectively.
Aside from that, the highly anticipated European Central Bank (ECB) policy decision. On Thursday may inject some volatility into the markets and provide a significant boost to the gold price. Meanwhile, Tuesday’s Richmond Manufacturing Index publication, combined with US government yields, USD price dynamics, and broader risk sentiment, may provide short-term trading possibilities. Nonetheless, the aforementioned mixed fundamental backdrop calls for prudence before putting strong directional wagers on the XAUUSD.
Daily Market Movers: Gold price lacks positive confidence amid speculations on delayed Fed rate cut.
The prospect of further escalation of conflicts in the Middle East. Along with China’s economic troubles, helps the safe-haven gold price regain some positive traction. On Tuesday.
The US and UK have launched a new round of combined air strikes against the Iran-backed Houthis in Yemen. Who have been targeting commercial vessels sailing through the Red Sea.
Pakistan and Iran have resolved to handle their differences diplomatically. Whereas the Israel Hamas confrontation is on the verge of escalating into a large-scale war that will have a global economic impact.
Investors are continuing to lower their expectations for a more aggressive policy easing by the Federal Reserve in light of indicators that the economy is still in decent shape.
The current market pricing predicts a 40% possibility of a March rate drop. Down from as much as 80% a week ago, and five 25 basis point rate cuts for 2024, compared to six two. Weeks ago.
The yield on the benchmark 10-year US government bond remains slightly below the highest level since December. Reached last week, and could act as a tailwind for the US Dollar, capping the XAUUSD.
Bank of Japan, as expected, chose to maintain the status quo.
The Bank of Japan, as expected, chose to maintain the status quo. And keep its ultra loose monetary policy settings unaltered at the end of its January meeting on Tuesday.
Traders now look to the European Central Bank (ECB) meeting. Which along with the global PMIs, the Advance US Q4 GDP. And the US Core PCE Price Index, for a new directional impulse.
