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- Gold price is seen consolidating its recent losses to a three-week trough.
- Reduced bets for a March Fed rate cut cap the upside for the XAU/USD.
- Traders also seem reluctant ahead of the crucial FOMC policy decision.
Gold price (XAU/USD) remains on the defensive during the Asian session on Wednesday and currently trades around the $1,978 region, just above its lowest level since November 20 touched earlier this week. The latest consumer inflation figures released from the United States (US) on Tuesday further dampened the prospects for an early policy easing by the Federal Reserve (Fed). Apart from this, the prevalent risk-on environment, further bolstered by hopes for more stimulus measures from China, is seen as a key factor acting as a headwind for the safe-haven precious metal.
That said, geopolitical risks, along with growing acceptance that the Fed will start easing its monetary policy by the first half of 2024, act as a tailwind for the non-yielding Gold price. Furthermore, the uncertainty over the timing of when the US central bank may begin cutting interest rates keeps the US Dollar (USD) bulls on the defensive, which might further contribute to limiting the downside for the commodity. Traders might also refrain from placing aggressive directional bets and prefer to wait for the outcome of the highly-anticipated two-day FOMC monetary policy meeting.
The Fed is scheduled to announce its decision later during the US session and is expected to maintain the status quo. The market focus, meanwhile, remains glued to the accompanying monetary policy statement and updated economic projections, which include the so-called “dot plot”. This will be followed by Fed Chair Jerome Powell’s post-meeting press conference, which will be scrutinized closely for confirmation of a change in the central bank’s policy stance. The markets are currently pricing in the possibility of at least four 25 basis point (bps) rate cuts by the Fed in 2024. Hence, a dovish pivot will exert heavy pressure on the US Dollar (USD) and trigger a fresh leg up for the non-yielding Gold price.
Daily Digest Market Movers: Gold price struggles to attract any buyers, looks to Fed for fresh impetus
- The uncertainty over the Federal Reserve’s near-term policy outlook holds back traders from placing directional bets around the Gold price and leads to subdued range-bound price action.
- Data released from the United States on Tuesday showed that consumer prices rose unexpectedly in November, forcing traders to further scale back bets for a rate cut in March.
- The US Labor Department reported that the headline Consumer Price Index (CPI) edged up 0.1% in November and the yearly rate ticked down to 3.1% from the 3.2% previous.
- The annual Core CPI inflation, which excludes volatile food and energy prices, held steady at 4.0% as forecast and rose 0.1% on a monthly basis, little changed from the previous month.
- The November numbers were still well above the Fed’s 2% target and come on top of the stronger-than-expected US jobs report last Friday,