Gold edged up against a weaker greenback.
Gold prices surge to over $2,170 per troy ounce, recouping losses from the previous two sessions. The rise in gold prices can be ascribed to a weaker US Dollar (USD). Which is affected by the Federal Reserve’s dovish outlook on interest rate hikes.
The US Dollar falls as speculation grows that the Fed will begin cutting interest rates in June.
Market opinion points to the Fed initiating interest rate decreases beginning in June. And a weaker Greenback has increased the attraction of bullion. During a press conference, Federal Reserve Chair Jerome Powell stated that an unexpected increase in unemployment may prompt the central bank to consider cutting interest rates. Powell also reassured investors that the Fed would not react hastily to consecutive months of high inflation data.
Furthermore, despite recent strong inflation readings. Fed policymakers have indicated. That they continue to expect to cut interest rates by three quarters of a percentage point by the end of 2024, which has boosted gold prices.
The gold market may face a test as US Treasury yields fall on increased risk sentiment.
Indeed, the decrease in US yields suggests a shift in investor sentiment toward US Treasury bonds. Which might pose a challenge to non yielding assets such as gold. The 2 year and 10 year yields on US Treasury notes remained unchanged at 4.60% and 4.21%, respectively. Investors may consider the relative safety and stability of Bonds are more enticing than gold.
The next US inflation numbers are expected to have a substantial impact on precious metal prices. Gold traders will closely monitor the release of Gross Domestic Product (GDP) data for the fourth quarter of 2023. And the Personal Consumption Expenditures (PCE) price index report from the United States (US) during the week. As these indicators can provide insights into inflationary pressures and influence Gold prices accordingly.
