Gold (XAU/USD) recovers from mid-$2,000s in early Asian trading, currently near $2,030.
Market awaits US Consumer Price Index (CPI) data on Thursday for fresh cues.
US Dollar Index (DXY) around 102.28, Treasury yields edge lower.
Gold prices are staging a recovery in the early Asian session, reclaiming ground below the mid-$2,000s. Currently trading near $2,030, the yellow metal faces the possibility of selling pressure amid expectations that the US Federal Reserve may maintain its cautious stance for a more extended period.
The US Dollar Index (DXY), reflecting the USD against a basket of currencies, is hovering around 102.28 after facing rejection from a multi-week high of 103.10. Treasury yields are slightly lower, with the 10-year yield at 4.02%.
Recent indicators, including the FOMC minutes and the December Nonfarm Payrolls report, suggest that caution in monetary policy is still warranted. The market anticipates a robust US economy in Q4 2023 and throughout 2024, reducing the need for an aggressive rate-cutting stance by the Fed. This scenario might bolster the USD and limit the upside for gold.
Atlanta Fed President Raphael Bostic and Fed Governor Michelle Bowman have signaled a preference for maintaining a tight monetary policy, citing inflation still above the 2% target. However, the overall risks in the economy are viewed as balanced between rising prices and slower employment growth.
Investors are eagerly awaiting fresh impetus from this week’s US Consumer Price Index (CPI) data, scheduled for release on Thursday. Projections indicate a 0.2% MoM rise and a 3.2% YoY increase in the headline CPI figures for December. The Core CPI, excluding volatile food and energy prices, is expected to show a 0.2% MoM rise.
Gold traders will closely monitor the CPI data for signals on inflation, which could influence the Fed’s future policy decisions. The outcome of the CPI report is likely to provide renewed direction for gold prices in the near term.
