During the early Asian session on Wednesday, the gold price (XAU/USD) remains under pressure, trading below the mid-$2,000s. Ongoing demand for the US Dollar (USD) and higher US Treasury yields continue to exert downward pressure on the precious metal. As of the latest update, the gold price is at $2,025, experiencing a 0.09% decline for the day.
The US Dollar Index (DXY), gauging the USD against a weighted basket of currencies, has extended its upward trajectory, reaching new year-to-date peaks beyond the 103.30 level. Simultaneously, US Treasury yields are on the rise, with the 10-year yield standing at 4.05%.
Federal Reserve (Fed) Governor Christopher Waller’s comments on Tuesday have influenced market expectations. Waller stated that the Fed has the capability to lower the target range for the federal funds rate this year. While the markets are currently pricing in a 67% likelihood of a rate cut by the FOMC in March, expectations for 2024 were initially raised to seven cuts but were revised to six following Waller’s remarks.
Geopolitical tensions in the Middle East have escalated as Iranian-backed Houthi militants in Yemen initiated a series of attacks on shipping lanes critical for global trade. After damaging a US-owned commercial ship on Monday, concerns are rising over potential supply disruptions, benefitting traditional safe-haven assets like gold.
China’s Premier Li Qiang reported that the economy grew by around 5.2% in 2023, surpassing the government’s official growth target without relying on massive stimulus. However, market focus shifts to upcoming Chinese economic data, with Industrial Production estimated to remain at 6.6% in December YoY, and Retail Sales projected to ease to 8% YoY from the previous 10.1%.
Traders are closely watching the Chinese economic data, and attention will shift to the December US Retail Sales report scheduled for later on Wednesday. The expected increase of 0.4% MoM, compared to the prior 0.3%, could provide a clearer direction for the gold price amid these economic developments.
