The price of gold (XAU/USD) saw a modest uptick on Tuesday, maintaining its position above the $2,150 level, or the weekly low, as it headed into the European session. However, the upward movement lacked strong follow-through as traders awaited more clarity on the Federal Reserve’s (Fed) stance on interest rate cuts before making fresh directional decisions for the non-yielding precious metal.
The release of warmer-than-expected US consumer inflation data on Tuesday sparked speculations that the Fed might adhere to its “higher for longer” narrative in the short term. This development acted as a potential headwind for gold, given its non-yielding nature.
Despite this, the market sentiment still leans toward the probability of the US central bank initiating interest rate cuts in June. The softer tone around US Treasury bond yields contributes to the defensive stance of the US Dollar (USD), creating a supportive environment for gold prices. Additionally, persistent geopolitical tensions serve as a counterbalance, offsetting the negative factors and providing support to the safe-haven appeal of XAU/USD.
Traders appear cautious and reluctant to make significant moves, opting to wait on the sidelines ahead of the highly-anticipated two-day Federal Open Market Committee (FOMC) monetary policy meeting scheduled to begin next Tuesday. The outcome of this meeting is expected to provide clearer signals about the Fed’s future monetary policy decisions, influencing the direction of gold prices in the near term.
