Gold Price Fluctuates: Eyes on Fed’s Rate Decision

At Glance

• Gold price consolidation continues, hovering around $2025 after a two-day sell-off.
• Strong US economic indicators dampen prospects for aggressive Fed rate cuts.
• Global factors and technical analysis signal a bearish short-term outlook for gold.

Gold prices are currently in a consolidation phase following a two-day sell-off, indicating the market is seeking direction amid a light economic calendar. The price hovers around the $2025 mark, staying within the trading range set on Monday. Despite a minor decline, the US dollar retains its bullish appeal, bolstered by strong US manufacturing and service sectors. With a positive outlook for 2024, aggressive Federal Reserve rate cuts appear increasingly unlikely. The rise in the Service PMI to 53.4, exceeding expectations, reinforces this perspective.

Anticipating the Fed: A 55% Chance of May Rate Cut

The financial community eagerly anticipates the Federal Reserve’s stance on interest rates, with policymakers currently downplaying the need for immediate rate cuts. A March rate cut seems improbable, but there’s a 55% probability of a 25 basis points reduction by May. Comments from Minneapolis Fed President Neel Kashkari highlight the Fed’s cautious approach to rate cuts and economic risk assessment, with expectations leaning towards a “soft landing” for the economy, aiming to avoid drastic policy shifts.

Geopolitical Influence on Gold Prices

Geopolitical developments, including a potential ceasefire between Israel and Palestine in Gaza and diplomatic talks between US Secretary of State Antony Blinken and Saudi Arabia’s crown prince regarding the Gaza conflict, could impact market sentiments. Technically, gold remains supported above the $2000 level. However, a strong dollar, high yields, and the Fed’s cautious monetary stance contribute to a bearish outlook for gold in the short term.

Gold Price Forecast

The recent approach to a near two-week low for gold is largely due to the dollar’s strength and rising Treasury yields. The downside target is identified at the 200-day moving average of $1965.64, while there’s potential resistance at $2067.00.