Gold attracted some follow-through buying for the second day in a row.
On Thursday, the gold price (XAUUSD) builds on the previous day’s robust rebound from the neighborhood of the 50-day Simple Moving Average (SMA), around $1,973, or more than a three-week low, and gains upward traction for the second consecutive day. During the Asian session, the precious metal reaches a one-week high before stalling near the $2,040 supply zone. The prevalent risk-on environment is regarded as critical. A factor acting as a headwind for the safe-haven metal. However, the Federal Reserve’s (Fed) dovish trend, as well as geopolitical risk and concerns about a Chinese economic slowdown, favor bullish traders and strengthen the commodity’s prospects for further appreciation.
The metal is being supported as US bond yields and the USD continue their post-FOMC decline.
The Fed signaled on Wednesday that it is no longer rising interest rates, and the “dot plot” predicted three 25-basis-point (bps) rate cuts in 2024. Furthermore, barring a recession, policymakers forecast inflation approaching the Fed’s 2% target. This resulted in a dramatic drop in US Treasury bond yields overnight, as well as substantial selling around the US Dollar (USD), which continued unabated on Thursday and should continue to support the non-yielding Gold price. Moving on, the most recent monetary policy Swiss National Bank (SNB), Bank of England (BoE), and European Central Bank (ECB) releases may instill some volatility in the markets and provide some impetus ahead of US Retail Sales figures.
Daily Market Movers: Gold price consolidates near one-week high, with bullish bias remaining
The Federal Reserve kept interest rates at a 22-year high for the third meeting in a row on Wednesday, striking a more dovish tone in the accompanying policy statement.
Policymakers envision inflation approaching the 2% annual objective without a recession and the fed funds rate peaking at 4.6% in 2024, down from 5.1% in September.
According to data released on Wednesday, the growth in average fees that businesses pay to Supplier growth slowed to 0.9% in November, down from 1.2% in October.
The markets are now pricing in a nearly 60% possibility that the Fed will start cutting rates at its March meeting, and the odds of a May rate drop are 90%, up from 80% before the news.
The yield on the benchmark 10-year US government bond falls to its lowest level since August, while the yield on the rate-sensitive two-year Treasury note falls to its lowest level since July.
The post-FOMC US Dollar selling adds to gold’s support, as the risk-on climate limits further gains ahead of the central bank fiesta on Thursday.
The Swiss National Bank (SNB), the Bank of England (BoE), and the European Central Bank (ECB) The European Central Bank (ECB) will disclose its policy choices later today, which may cause some volatility.
Traders will take further clues from the US monthly Retail Sales data on Thursday, with consensus expectations pointing to a 0.1% drop in November for the second consecutive month.
