Gold expected to recover its recent losses to a three week low.
During the Asian session on Wednesday, the gold price (XAUUSD) trade in a narrow trading band. And is now trading about $1,980, slightly above a three-week low reached on Monday. The precious metal received a slight boost on Tuesday with the announcement of consumer inflation numbers from the United States (US). Although the rally peaked just short of the $2,000 psychological threshold. Traders avoid placing aggressive directional bets and instead aim additional clarification on the Federal Reserve’s (Fed) policy outlook. As a result, market movement has been range bound for the second day in a row ahead of the highly anticipated FOMC policy announcement later today.
The US Federal Reserve is widely expected to maintain the status quo. And leave interest rates unchanged at the conclusion of a two day meeting on Wednesday. As a result, the market will be focused on the accompanying monetary policy statement. And updated economic estimates. This will be followed by Fed conference. Which will be widely watched for confirmation of a policy shift. Indeed, markets are presently pricing in at least four 25 basis point (bps) rate reduction by the Fed in 2024. . As a result, a dovish pivot will put significant pressure on the US Dollar (USD). And ignite a new leg up for the non yielding Gold price.
In terms of the key event risk, the release of the US Producer Price Index (PPI) during the early North American session may provide minimal impetus to the Gold price. Meanwhile, the existing risk-on climate, as illustrated by an extension of an equity market surge, may continue to operate as a headwind for the safe haven XAUUSD, limiting any intraday recovery.
Daily Market Movers: The gold price is looking on the Fed for some major directional push.
The uncertainty surrounding the Federal Reserve’s near term policy outlook prevents traders from placing directional bets on the gold market and leads to higher prices. to price action that is range-bound.
Data from the United States released on Tuesday revealed that consumer prices climbed unexpectedly in November, prompting traders to reduce their bets on a rate cut in March.
According to the US Labor Department, the headline Consumer Price Index (CPI) increased 0.1% in November. But the yearly rate fell to 3.1% from 3.2% previously.
The annual Core CPI inflation rate, which excludes volatile food and energy costs, remained unchanged at 4.0%. Rising 0.1% on a monthly basis, hardly altered from the previous month.
The November figures were still considerably over the Fed’s 2% target. And come on top of a stronger than expected US jobs data last Friday, indicating that the economy is sturdy.
Traders appear to be cautious ahead of the critical FOMC policy announcement.
The marketplace The outcome of the key two day FOMC monetary policy meeting is expected to be announced later this Wednesday during the US session.
Investors will be looking for new clues about when the Fed may begin decreasing rates in 2024. Which will drive US Dollar demand and influence the yellow metal.
Hopes for stimulus from Chinese authorities continue to outweigh the possibility of further escalation of geopolitical tensions in the Middle East, supporting the risk-on mentality.
State media reported on the annual Central Economic Work Conference, which concluded on Tuesday. That China will increase policy adjustments to assist economic recovery in 2024.
Yemen’s Iran backed Houthi militants announce rules for transiting the country.
This, however, does little to discourage investors’ desire for perceived riskier assets or weaken underlying bullish market sentiment. So benefiting the precious metal.
