Gold rises, but it remains restricted to a typical range.
The gold price (XAUUSD) captures some bids on Thursday and maintains a bid tone during the first part of the European session. Albeit being below the $2,040-$2,042 resistance zone. The US Dollar (USD) is trading with a modest negative bias in a typical range. That has been in place for the past week or two due to uncertainty over the Federal Reserve’s (Fed) rate-cutting course. This, together with geopolitical dangers arising from The Federal Reserve’s rate-cutting plan. Keeps US Dollar supporters on the defensive and helps the gold market acquire some upward traction ahead of US consumer inflation statistics.
Markets reacted quickly to the Fed’s unexpected dovish turn at the December policy meeting.
Markets reacted quickly to the Fed’s unexpected dovish turn at the December policy meeting. And are now pricing in five interest rate reduction by the end of 2024, totaling about 140 basis points (bps) of easing.
The incoming US macro data highlighted the basic resiliency of the American economy. Prompting investors to reduce their expectations for more aggressive policy easing.
On Wednesday, New York Fed President John Williams stated that the US central bank is in a ‘excellent situation. And has time to consider what comes next for rates. But would eventually need to return policy to more neutral levels.
US Treasury Secretary Janat Yellen spoke from Boston on Wednesday. Saying that more work is needed to manage inflation and promising to utilize “all tools at our disposal” to reduce expenses.
The yield on the benchmark 10-year US government bond remains above the 4.0% level. Limiting additional losses for the USD and limiting any further gains for the non-yielding yellow metal ahead of the US data.
Any major gains ahead of the critical US CPI report should be limited by the Fed’s rate-cut uncertainty.
The headline US CPI is predicted to grow 0.2% in December, raising the yearly rate to 3.2% from 3.1%. While the core index (excluding food) is expected to gain 0.2%.and energy costs) is expected to fall to 3.8% year on year from 4.0% in the previous month.
Cooler-than-expected inflation figures will offer the Fed more cause to decrease interest rates this year. Which will act as a negative trigger for the Greenback, resulting in a new leg up for the precious metal.
A stronger US CPI figure, on the other hand, might provide the US central bank more leeway. To maintain interest rates higher for longer. Causing the XAUUSD to break through a multi-week low reached on Monday.
