Gold prices slip down, eroding some of Friday’s gains to more than a two-week high.
The gold price (XAUUSD) rose for the first time in three weeks, owing to continued geopolitical concerns and the recent corrective dip in the US Dollar (USD).
Hawkish Fed forecasts turn out to be a major drag on the XAUUSD.
The precious metal, however, struggles to benefit on its rise beyond the 50-day Simple Moving Average (SMA) and starts the new week on a negative note on bets that the Federal Reserve (Fed) would retain rates. Higher for longer.
Geopolitical uncertainties may provide support for the XAUUSD and aid limit additional losses.
The downside, however, appears to be restricted in light of the danger of additional escalation of military action in the Middle East and the ongoing Russia-Ukraine conflict, which offers some support to the safe-haven gold price heading into the European session. Traders also appear cautious, waiting for this week’s release of the US Core PCE Price Index for clues about the Fed’s future policy decisions before putting new directional bets.
Daily Market Movers: Gold stays low amid Fed rate cut worries, but geopolitics restrict the damage.
The US dollar saw its first weekly decline in 2024, which, combined with increased demand for conventional safe-haven assets, pushed the gold price to a two-week high on Friday.
The growing conviction of The Federal Reserve’s decision to wait until the June policy meeting before decreasing interest rates limits further appreciation for the non-yielding yellow metal.
The January FOMC meeting minutes, released last week, revealed that policymakers broadly agreed that they needed more confidence in decreasing inflation before considering rate cuts.
Furthermore, a number of prominent Fed officials recently stated that future interest rate reduction are improbable as the central bank seeks to return inflation to the 2% annual target.
The US Treasury bond yields fell from a new YTD high reached last week, but they remain solidly supported by the Fed’s hawkish outlook and continue to operate as a tailwind for the US dollar.
Meanwhile, investors remain anxious about the geopolitical concerns. Conflicts in the Middle East and the Russia-Ukraine war may provide some support for the safe-haven Gold.
Despite the uncertainties around a truce, Israel has indicated its determination to intensify its operations to destroy Hamas, while Russia is planning a fresh onslaught against Ukraine that will begin in late May or early July.
US and UK fighter planes carried out strikes on Houthi targets in Yemen.
On Saturday, US and UK fighter planes carried out strikes on Houthi targets in Yemen, as Iran-backed Houthi rebels continued to attack commercial vessels along the key Red Sea commerce route.
Ukraine’s President Volodymyr Zelensky stated on Sunday that Russia is preparing a fresh onslaught against the country that will begin in late May or early July, and that Kyiv has its own clear battlefield plan.
Investors are already expecting this week’s key US Before initiating new directional bets on the commodity, look to macro indicators, especially the Core PCE Price Index, for signals about the Fed’s future policy decisions.
