Gold price (XAU/USD) soars to $2,190 in Wednesday’s late European session amid multiple tailwinds.
Gold price jumps higher as expectations that the Fed will cut interest rates in June remain firm. The Fed appears to be confident that inflation is easing toward the 2% target. Investors await the US core PCE inflation for fresh guidance.
Gold price soars to $2,190in Wednesday’s late European session amid multiple tailwinds. The main driver is that expectations for the Federal Reserve reducing interest rates from the June meeting remain firm. These expectations, which also price in two more cuts by the end of the year, have strengthened the appeal of Gold. On Monday, Chicago Fed Bank President Austan Goolsbee cautioned that the inflation outlook is uncertain due to higher housing inflation. However, he remained confident that the fundamental story of inflation returning to the 2% target has not changed. Firm market expectations for the Fed cutting rates in June have supported Gold prices as it lower the opportunity cost of investing in it. Meanwhile, 10-year US Treasury yields have dropped to 4.19% ahead ofthe crucial United States core Personal Consumption Expenditure price index for February, which will be published on Friday. The underlying inflation data will significantly influence Gold prices as it will provide some clues over the time frame in which the Fed intends to start cutting interest rates. The US Dollar Index , which measures Greenback’s value against six major currencies, rebounds to104.40. Daily digest market movers: Gold price moves higheras US yields edge down Gold price rises to $2,190, aiming to recapture all-time highs of $2,223. Investors remain gung-ho for Gold as expectations for the Federal Reserve to begin rate cuts from the June policy meeting have strengthened. The CME FedWatch tool shows that there is almost a 70% chance that a rate-cut cycle will get started in June. Last week, bets for the Fed lowering key borrowing rates from June were dashed by hot consumer price inflation readings. However, the release of the latest dot plot – which pointed out that officials still expect three rate cuts in 2024 – has renewed hopes of upcoming rate cuts. The Fed is confident that the underlying story of inflation easing to 2% has not changed despite back-to-back stubborn Consumer Price Index data in the first two months of 2024. However, the Fed didn’t offer any cues about when it could start cutting rates. This week, the release of the United States core PCE price index data for February will provide fresh cues about Fed rate cut timing. Uncertainty over the timing of rate cuts could deepen if the inflation data turns out hotter than expected. Core PCE is estimated to have grown steadily by 2.8%, with monthly growth declining to 0.3% from 0.4% in January. A stubborn inflation data would dampen the Gold’s appeal as hot inflation figures could delay the Federal Reserve’s plans to reduce interest rates. On the contrary, soft inflation figures could hit the US Dollar and US bond yields, supporting demand for Gold. But before that, investors will focus on the speech from Fed Governor Christopher Waller, who will speak at 22:00 GMT about the US economic outlook before the Economic Club of New York. Investors will keenly focus on fresh guidance on interest rates. Technical Analysis: Gold price jumps to$2,190 Gold price jumps to$2,190 amid multiple tailwinds. The precious metal is aiming to recapture the all-time highs slightly above $2,220. The near-term demand is upbeat as all short-to-long term Exponential Moving Averages are sloping higher. The Gold price could face a hurdle near $2,250, which coincides with the 161.8% Fibonacci extension level, after breaking above the resistance of $2,220. The Fibonacci tool is plotted from December 4 high at $2,144.48 to December 13 low at $1,973.13. On the downside, December 4 high at $2,144.48 will support the Gold price bulls. The 14-period Relative Strength Index rebounds after cooling down to 64.00 from an extremely overbought zone. Fed FAQs What does the Federal Reserve do, how does it impact the US Dollar? Monetary policy in the US is shaped by the Federal Reserve . The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback. How often does the Fed hold monetary policy meetings? The Federal Reserve holds eight policy meetings a year, where the Federal Open Market Committee assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis. What is Quantitative Easing and how does it impact USD? In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing . QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar. What is Quantitative Tightening and how does it impact the US Dollar? Quantitative tightening is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
United States Latest News, United States Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
Gold Price Forecast: XAU/USD primed for a Bull Pennant, pre-Fed profit-takingGold price is consolidating weekly losses near $2,160 early Friday, as risk sentiment remains sour and keeps the US Dollar (USD) underpinned.
Read more »
Gold Forecast: XAU/USD pulls away from record highs ahead of Fed meetingFollowing the previous week’s record-setting rally, Gold staged a correction this week, pressured by recovering US Treasury bond yields.
Read more »
Gold Price Forecast: XAU/USD starts the Fed week on the defensive, where next?Gold price is looking to extend the previous week’s downtrend, sitting at weekly lows near $2,150 in Asian trading on Monday.
Read more »
Gold Price Forecast: XAU/USD extends consolidative phase ahead of FedSpot Gold remains confined to a tight intraday range on Wednesday, hovering around the $2,155 mark.
Read more »
Gold Price Forecast: Will XAU/USD sustain its record rally on dovish Fed outlook?Gold price is correcting from a fresh all-time high of $2,223 reached in early Asian trading on Thursday, although defends the $2,200 threshold amid sustained weakness in the US Dollar (USD) and the US Treasury bond yields.
Read more »
Gold Price Forecast: XAU/USD retraces recent losses, rises to near $2,170Gold price rises to near $2,170 per troy ounce, reclaiming losses from the previous two sessions.
Read more »