The price of gold (XAU/USD) has continued to attract buyers for the sixth consecutive day, hovering near the all-time peak range of $2,265-$2,266 reached the previous day. This sustained interest in gold comes amidst several factors influencing market sentiment.
The release of upbeat US manufacturing data on Monday has sparked speculation regarding the Federal Reserve’s stance on interest rate cuts for the remainder of the year. The optimism surrounding the US economy has raised doubts about the likelihood of three rate cuts, as previously anticipated. Additionally, the persistent risk of further escalation in geopolitical tensions in the Middle East has dampened investors’ appetite for riskier assets, thereby bolstering demand for the safe-haven qualities of gold.
Market dynamics also reflect a nuanced picture regarding interest rate expectations. While the markets are currently pricing in a total of 69 basis points (bps) in rate cuts for 2024, slightly lower than the Fed‘s projected 75 bps, this scenario continues to support elevated US Treasury bond yields. Consequently, the US Dollar (USD) has climbed to its highest level since February 14. This uptick in the USD may act as a limiting factor for gold prices, given its non-yielding nature.
Looking ahead, market participants are likely to adopt a cautious stance, awaiting further clarity on economic indicators and speeches by influential Federal Open Market Committee (FOMC) members during the North American session. Bullish sentiment in the gold market may also encounter resistance amid signs of overextension on the daily chart, prompting investors to anticipate a period of consolidation in the near term.
Overall, the confluence of economic uncertainties, geopolitical tensions, and monetary policy expectations continues to shape the outlook for gold prices, with investors closely monitoring developments for cues on future market direction.
