Gold prices struggle to establish traction and are impacted by a number of opposing forces.
The gold price (XAUUSD) attracted some dip-buying during Wednesday’s Asian session. And appears to have stalled the previous day’s late decline from the crucial threshold of $2,200.
Uncertainty about whether the Fed would lower interest rates three times this year lifts the USD and caps gains.
The Federal Reserve (Fed) stated this week that it is still on schedule to decrease interest rates by 75 basis points in 2024. This, along with a softer risk tone amid concerns about geopolitical risks arising from the ongoing Russia Ukraine War. And crises in the Middle East have proven to be major factors in supporting the safe haven precious metal.
The upside for the gold price, however, appears restricted in the aftermath of some follow through US Dollar (USD) purchasing. Aided by Tuesday’s better than-expected release of US Durable Goods orders. The report supported the idea that the US economy is in good form. Which, along with persistent inflation, may drive the Federal Reserve (Fed) to keep interest rates higher for longer. The prognosis remains supportive of rising US Treasury bond yields, bringing the USD closer to a multi week high reached last Friday, which may limit advances in the non yielding yellow metal.
Daily Market Movers: Gold price consolidates as traders await further clues concerning The Fed’s Rate-Cut Path.
The Federal Reserve last week predicted less restrictive monetary policy in the future. And signaled three rate cuts by the end of the year. Which acted as a tailwind for the non yielding gold price.
Russia increased its attacks on Ukrainian energy infrastructure in reaction to the latter’s recent drone raids on its oil refineries. Raising the prospect of tensions escalating further.
Iran-backed Houthi militants said on Tuesday that they had launched six attacks on ships in the Gulf of Aden and the Red Sea in the previous 72 hours, reducing investors’ demand for riskier assets.
US Dollar adds to the previous day’s modest gains.
The US Dollar adds to the previous day’s modest gains that followed data revealing. That US Durable Goods Orders increased by 1.4% in February compared to the previous month’s 6.2% decline.
Separately, the Conference Board said that the US Consumer Confidence Index fell to 104.7 in March. Slightly changed from the previous month’s reading of 104.8, amid diminishing recession fears.
Furthermore, consumer inflation expectations rose to 5.3% in the reported month from 5.2% in February. Perhaps forcing the Federal Reserve to hold interest rates higher for longer.
The outlook puts the yield on the benchmark 10-year US government bond over 4.0% and continues to support the Greenback, thus XAUUSD bulls should exercise caution.
Traders may also want to wait for the release of the US Personal Consumption and Expenditure (PCE) Price Index for more indications on the Fed’s policy course, and before putting new directional bets.
