The price of gold (XAU/USD) is struggling to extend its weekly gains as it hovers within a narrow trading range during the first half of the European session on Wednesday. The US Dollar (USD) has attracted buying interest, partially reversing the losses from the previous day. The uncertainty surrounding the Federal Reserve’s (Fed) timeline for implementing monetary policy adjustments is contributing to the dollar’s fluctuation. Additionally, the prevailing risk-on sentiment in the market is acting as a headwind for the safe-haven precious metal.
Despite the dollar’s rebound, the downside for the Gold price appears limited due to increasing expectations of an imminent shift in the Fed’s policy stance. Market sentiment is now pricing in a higher probability of an interest rate cut as early as March 2024, with an expected cumulative rate cut of 140 basis points through the end of the next year. This has kept US Treasury bond yields near multi-month lows. Furthermore, concerns related to geopolitical risks associated with the Middle East conflict suggest that the path of least resistance for the non-yielding yellow metal remains to the upside.
Traders, however, seem cautious about making aggressive directional bets and are adopting a wait-and-see approach ahead of the release of the Fed’s preferred inflation gauge – the US Core Personal Consumption Expenditure (PCE) Price Index on Friday. This crucial US inflation reading is expected to influence the Fed’s future policy decisions and drive the USD, providing new momentum for the Gold price. Meanwhile, short-term trading opportunities may arise on Wednesday with the release of the Conference Board’s Consumer Confidence Index and an appearance by Chicago Fed President Austan Goolsbee.
