Gold prices (XAU/USD) showcased a swift recovery during Thursday’s early New York session, finding solid support on the downside as investors remain cautious about ruling out potential rate cuts from the Federal Reserve (Fed) later this year. Despite the recent remarks by Fed Chair Jerome Powell signaling a lack of interest in immediate rate-cut speculation, the underlying sentiment suggests that such measures cannot be entirely dismissed.
In Powell’s recent monetary policy statement, he emphasized the Fed’s skepticism regarding the sustained return of underlying inflation to the 2% target, tempering expectations for rate cuts in March. This has led investors to shift their focus to the May policy meeting as a potential timeframe for the first rate cut in this cycle.
As the market progresses, the inflation outlook becomes contingent on factors such as labor market conditions, consumer spending, and overall economic growth. These variables will shape the narrative for rate-cut expectations, with investors closely monitoring data releases to discern the trajectory of the Federal Reserve’s policy decisions.
Investors are currently awaiting key economic indicators, including January’s Institute for Supply Management’s (ISM) Manufacturing Purchasing Managers’ Index (PMI) and the highly anticipated Nonfarm Payrolls (NFP) data. Notably, the expectations for a rate cut in May could diminish if employment and wage growth data surpass initial projections, adding an additional layer of uncertainty to the evolving economic landscape.
