Gold Price Forecast: XAU/USD Remains Subdued amid Waning Fed Rate Cut Expectations
By FXStreet Editorial Team; Additional reporting and analysis by AI Assistant | Source: FXStreet | Original Article by Anil Panchal
Gold prices (XAU/USD) held steady near the $2,080 mark in the latest trading sessions, under pressure as waning expectations for imminent interest rate cuts by the U.S. Federal Reserve dampen bullish momentum. The yellow metal, while hovering near its all-time highs, has found strong resistance just below the $2,100 psychological threshold. Investors now await further clarity on the U.S. monetary policy trajectory, as well as fresh economic data, to guide market direction.
In recent sessions, softer inflation indicators initially stoked hopes of a dovish pivot by the Fed. However, subsequent hawkish remarks from several Federal Open Market Committee (FOMC) members and better-than-anticipated economic data have caused traders to revise their expectations, weighing on non-yielding assets like gold.
Current Market Overview
– Spot gold is trading around $2,080 per ounce, marginally lower on the day.
– U.S. Treasury yields have rebounded after a brief dip in response to inflation data, reducing gold’s appeal.
– The U.S. Dollar Index (DXY) remains stable, trading near 103.50, exerting further pressure on the gold market.
– Gold futures have also softened, reflecting the broader market consolidation in precious metals.
The U.S. macroeconomic backdrop, especially monetary policy changes and inflationary expectations, continues to be the key driver for gold prices. As inflation begins to cool, and with the labor market still relatively tight, the Fed finds itself at a strategic crossroad.
Federal Reserve’s Stance
Recent Fed comments have communicated a clear message: interest rate cuts are not guaranteed in the near term, especially if the economic data does not warrant such action. While markets had, until recently, priced in cuts as early as March 2025, the probability of this has significantly declined.
Key statements from policymakers include:
– Fed Governor Christopher Waller noted that while recent inflation reports were encouraging, more data is needed before declaring victory over inflation.
– Atlanta Fed President Raphael Bostic emphasized the need for continued policy restraint, stating the Fed must ensure inflation does not re-accelerate.
– Minneapolis Fed’s Neel Kashkari also remarked that it is too early to conclude whether further tightening might be needed.
Implications for Gold
Hawkish outlooks have a dual effect on gold:
– A less accommodative Fed delays the tailwinds for gold stemming from a weaker U.S. Dollar and falling yields.
– Higher real yields increase the opportunity cost of holding non-interest-bearing assets like gold.
– Investor appetite for gold may remain lukewarm unless rate cut expectations become more concrete.
Still, geopolitical tailwinds and the status of gold as a safe-haven asset continue to provide underlying support, especially in the face of global uncertainties.
Economic Data in Focus
Markets now turn their attention to upcoming U.S. economic releases, particularly:
1. U.S. Personal Consumption Expenditures (PCE) Price Index:
– Scheduled for release on February 29, 2024.
– The Fed’s preferred inflation gauge and crucial to determining the trajectory of rate cuts.
2. U.S. GDP Growth (Second Estimate Q4 2023):
– Due in the last week of February.
– Expected to provide insight into whether the U.S. economy is cooling under the pressure of elevated interest rates.
3. Labor Market Indicators:
– Non-farm Payrolls and average hourly earnings, due in early March.
– Any indication of labor market tightness could rekindle inflation fears and impact gold negatively.
Technical Analysis
Currently, gold remains range-bound within a narrow band:
– Immediate resistance sits at $2,095 with a stronger psychological barrier at $2,100 and the all
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