Gold price consolidates over $2,300, affected by a number of diverging influences.

The gold price (XAUUSD) fell for the first time in four days on Thursday, although it showed some tenacity below the $2,300 round-figure threshold and remained above it during the Asian session on Friday.

A hawkish adjustment in the Fed’s interest rate projections acts as a drag on the yellow metal.

Any real increase, however, appears difficult following the Federal Reserve’s (Fed) hawkish surprise on Wednesday. Indeed, officials, in the so-called “dot plot”, showed There will be only one interest rate decrease in 2024. This supports some follow-through US Dollar (USD) buying and should limit gains in the non-yielding yellow metal.

Aside from that, underlying positive sentiment in global equities markets should act as a drag on the safe-haven gold price. However, persisting geopolitical tensions in the Middle East and renewed political instability in Europe dampen confidence, providing some support for the precious metal. Furthermore, market players continue to price in a higher possibility that the Fed would deliver its first rate decrease as early as September, citing indicators of declining inflationary pressures. This should help to minimize the downside for the XAUUSD.

Daily Market Movers: Gold Bulls appear uncommitted amid the post Fed USD strength.

The Federal Reserve anticipated only one rate cut in 2024, compared to three cuts estimated at the March meeting, which is expected to support the US dollar and act as a headwind for the non-yielding gold price.
However, this week’s milder inflation statistics suggest that the Fed may reduce borrowing rates sooner than predicted, with the CME Group’s FedWatch Tool predicting a higher likelihood of the first rate decrease in September.

Signs of declining inflation keep hopes alive for a September rate decrease and provide some support.

According to statistics released by the US Bureau of Labor Statistics on Thursday, the Producer Price Index (PPI) for final demand increased by 2.2% year on year in May, lower than the 2.3% previously reported and 2.5% projected.
Additionally, the annual core PPI climbed 2.3% in the reporting month, falling short of April’s growth and the market’s expectations of 2.4%. The monthly PPI fell 0.2%, but the core PPI remained constant.
This follows Wednesday’s weaker CPI report, which showed that consumer prices remained constant in May for the first time since last June, with the yearly rate falling to 3.3% from 3.4% in April.
Separately, the US Department of Labor (DoL) stated that the number of Americans filing for unemployment insurance for the first time grew more than expected, reaching 242K last week from 229K the previous week.
Meanwhile, a sudden election in France triggered broader political concerns, which could limit losses for the safe-haven XAUUSD against the backdrop of Russia’s ongoing war in Ukraine and the conflict in the Middle East.
Investors are currently anticipating the preliminary release of the Michigan US Consumer Sentiment Index, which might influence USD price dynamics and create short-term trading opportunities on the final day of the week.