Gold (XAU/USD) rebounds from near three-week low, around $2,016, as US Consumer Inflation Expectations fall.
Market speculates on potential Fed interest rate cuts, weakening the US Dollar (USD).
Investors scale back expectations for aggressive Fed policy easing, supporting elevated US Treasury bond yields.
Asian equity market sentiment may limit gold’s gains as traders await US consumer inflation figures on Thursday.
Gold prices (XAU/USD) have gained positive traction during the Asian session, moving away from a near three-week low around the $2,016 region touched the previous day. The fall in US Consumer Inflation Expectations has increased market bets that the Federal Reserve (Fed) might consider cutting interest rates as early as March. This has kept the US Dollar (USD) bulls on the defensive for the second consecutive day, benefiting the non-yielding yellow metal.
Investors are adjusting their expectations for a potentially more dovish Fed policy, considering the hopes for a soft landing for the US economy, supported by a resilient labor market. The recent hawkish remarks from several Fed officials, however, have introduced uncertainty regarding the possibility of early interest rate cuts, supporting elevated US Treasury bond yields. This dynamic is expected to limit losses for the USD and constrain further gains for the gold price.
In addition to these factors, the positive trading sentiment in Asian equity markets may contribute to capping gains for the safe-haven XAU/USD. Traders are likely to exercise caution, refraining from aggressive bets and waiting for the release of the latest US consumer inflation figures on Thursday. This data will offer insights into the Fed’s future policy decisions and play a crucial role in influencing USD price dynamics, providing fresh directional impetus to the gold price.
