Gold price is moving sideways, indicating market consolidation.
During the European session on Wednesday. The gold price is hovering above $2,060 per troy ounce. The rise in gold prices is linked to traders factoring in the possibility of Federal Reserve (Fed) rate reduction. Furthermore, according to WIRP. The market has priced in a 15% chance of a cut on January 31. And has entirely priced in cuts by March 20th six cuts fully priced in by the end of 2024.
The Middle East turmoil adds to the risk-off mentality, driving up demand for safe-haven gold.
Tensions in geopolitics The heightened risk-off mentality in the Middle East is driving up demand for gold as a safe-haven asset. Despite their reservations, major shipping companies. Such as Maersk and CMA CGM have begun to return to the Red Sea, indicating a tentative normalization with the deployment of a multinational task force in the region.
Hapag-Lloyd’s decision on resuming shipments is expected on Wednesday. While there are concerns about Iran potentially blocking the Gibraltar Strait, many people doubt that such a move is feasible.
Softer US statistics on Friday led to the Greenback’s decline.
At the time of writing, the US Dollar Index (DXY) is trading below 101.50. The DXY appears to be under pressure. Owing to low US Treasury yields. Both the 2-year and 10-year yields on US bond coupons are trading at current levels. lower. With statistics at 4.29% and 3.88%, respectively, at the time of publication. Former Dallas Federal Reserve President Robert Kaplan echoed the remarks, pointing out the central bank’s historical blunder of prolonged excessive accommodation. Kaplan argues that the Federal Reserve is now treading carefully to avoid making a similar mistake on the other end of the spectrum, avoiding becoming unduly restrictive and potentially impeding economic growth.
The US Dollar was further weakened when the US Bureau of Economic Analysis (BEA) reported a weaker Core Personal Consumption Expenditures (PCE) Index for November. The year-on-year increase in US Core PCE inflation was 3.2%. Falling short of the predicted 3.3% and the prior 3.4%. Meanwhile, the month-on-month (MoM) data remained consistent at 0.1%. Slightly lower than the 0.2% target. 0.2% is the market expectation. Looking forward, the United States (US) will report Initial Jobless Claims and Pending Home Sales statistics on Thursday, providing additional insights into the economic situation.
