During the early Asian trading hours on Monday, the gold price (XAU/USD) found itself in negative territory. Despite the current dip, uncertainties surrounding the Federal Reserve’s (Fed) interest rates could potentially provide an uplift to the yellow metal in the near future. As of the latest update, the gold price is trading at $2,034, marking a 0.13% decline for the day.
The recent stronger-than-expected US inflation data has led to market expectations of a potential delay in interest rate cuts by the Fed. Fed Governor Christopher Waller’s statement last week, emphasizing that there is no rush to implement rate cuts, has contributed to the belief that the US might postpone rate cuts until June. This is a significant departure from earlier expectations of rate cuts as early as March. Traders are now adjusting their outlook, pricing in the likelihood of the first rate cuts beginning in June. The Fed’s most recent guidance indicated the possibility of three cuts this year.
Geopolitical tensions in the Middle East add another layer of complexity to the market dynamics. Despite recent US strikes on the Houthi group, the Houthis continue to attack commercial ships in the Red Sea and strengthen their weapons stockpile in Yemen. The escalating tensions in the region have the potential to boost the gold price, given its traditional status as a safe-haven asset.
Looking ahead, gold traders will be closely monitoring the US Gross Domestic Product Annualized for the fourth quarter (Q4), scheduled for release on Wednesday. Additionally, the Core Personal Consumption Expenditures Price Index (Core PCE) on Thursday is expected to provide further insights that could guide the direction of gold prices in the coming days.
