BusinessGold price slips as Federal Reserve rate cut hopes dim

Gold price slips as Federal Reserve rate cut hopes dim

  • Gold price experiences continued downward pressure for the third day in a row, leading to a drop to a low not seen in over a week.
  • The belief that the Fed will maintain higher interest rates for an extended period continues to hinder the XAU/USD currency pair.
  • Despite this, geopolitical uncertainties could help mitigate losses as the market awaits the upcoming FOMC policy decision.

Gold price, represented by the XAU/USD pair, is facing persistent selling pressure for the third consecutive day, resulting in a decline to a low point not reached in over a week. The metal is currently maintaining a downward trend below the $2,150 mark in the early stages of the European trading session. This trend is attributed to expectations that the Federal Reserve (Fed) may postpone interest rate cuts due to lingering inflation concerns in the United States. Additionally, the market outlook favors higher US Treasury bond yields, prompting capital flow towards the US Dollar (USD) and away from gold, which offers no yield.

Although there is speculation that the Fed could initiate rate cuts in June, there is still a prevailing uncertainty among USD investors. This indecision, combined with geopolitical risks, provides some support to gold as a safe-haven asset and helps prevent further declines. Market participants are exercising caution and opt to wait for additional cues regarding the Fed’s monetary policy before committing to a particular trading direction. As a result, all eyes are on the impending FOMC meeting scheduled for Wednesday, as the outcome will influence USD dynamics and inject fresh momentum into the market.

Market Overview: Gold price faces downward pressure amid hawkish Fed sentiment

  • Recent US data indicates a persisting level of inflation, prompting expectations that the Fed will uphold current interest rates, which consequently weighs on non-interest-bearing gold.
  • The University of Michigan’s preliminary survey revealed steady inflation expectations for March, while the US Consumer Sentiment Index saw a slight decline to 76.5.
  • The CME Group’s FedWatch Tool suggests a 60% probability of an interest rate cut at the June policy meeting, restraining USD bullish sentiment.
  • Heightened geopolitical tensions from the Russia-Ukraine conflict and unrest in the Middle East offer additional support to gold as a safe-haven asset.
  • Recent events, such as increased drone strikes by Ukraine on Russian oil facilities and Israeli military actions in Gaza, contribute to the prevailing geopolitical uncertainties.
  • Traders are exercising caution and await the outcome of the forthcoming FOMC meeting for clearer market direction.

Chart Analysis: Gold price faces indecisiveness, key support level at $2,145-2,144

When analyzing the technical aspects of the gold price movement,

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