The price of gold (XAU/USD) witnessed a decline, attracting intraday sellers after reaching the $2,049-2,050 range, subsequently settling towards the lower end of its daily range during the early part of the European session on Thursday. The surge in the US Dollar (USD) to a new high since December 13, following the Federal Reserve’s less dovish stance on interest rates, is identified as a primary factor acting as a headwind for the precious metal.
The Federal Reserve’s reduced inclination towards a dovish monetary policy has contributed to the strength of the US Dollar, impacting gold prices negatively. This shift in sentiment has occurred as the central bank signals a less accommodative approach to interest rates.
Despite the downward pressure on gold, potential geopolitical risks may provide some support to the safe-haven asset. The looming threat of an escalation in military action in the Middle East, coupled with economic challenges faced by China, could act as counterbalances, influencing market sentiment and supporting gold prices.
Furthermore, the ongoing decline in US Treasury bond yields might serve as a mitigating factor, helping to limit the downside for gold. The precious metal, often considered a non-yielding asset, may find some support from investors seeking refuge amid uncertainties.
As traders navigate the market landscape, attention is now focused on key economic events. The flash Eurozone Consumer Price Index (CPI) release, the Bank of England’s (BoE) policy decision, and upcoming US macroeconomic data are poised to provide fresh impetus and guide market participants in their assessment of gold’s trajectory. The intersection of global economic indicators and geopolitical developments will likely continue to shape the dynamics of gold prices in the near term.
