Gold price is maintaining a subdued recovery stance near $2,025 during the Asian session on Monday, bouncing back from a weekly low of $2,015. A retreat in the US Dollar (USD) from multi-month highs and a dip in US Treasury bond yields are allowing Gold sellers a momentary respite.
The focal point shifts to Fedspeak as the US economic calendar remains light.
Following a robust US Nonfarm Payrolls report and hawkish remarks from Federal Reserve (Fed) Chairman Jerome Powell, expectations of aggressive Fed rate cuts this year have diminished. This dynamic has bolstered the US Dollar and US Treasury bond yields, impacting the non-interest-bearing Gold price.
Friday’s US labor market report exceeded expectations, revealing an addition of 353K jobs in January compared to the anticipated 180K. Chairman Powell, in a Monday interview, dismissed the possibility of a rate cut next month while emphasizing a cautious approach to timing rate adjustments.
Early Monday, Gold found support from escalating geopolitical tensions involving the West and Iran-backed Houthi rebels. However, the sentiment shifted later in the day after the US ISM Services PMI surpassed expectations, reaching 53.4 in January. Gold succumbed to fading hopes of early and substantial interest rate cuts by the Fed, with the market now pricing in 115 basis points of cuts this year, down from around 150 bps anticipated a month ago.
Despite the US Dollar retracement and a decline in Treasury bond yields on Tuesday, Gold is struggling to extend its recovery. Traders are cautious, analyzing mixed messages from Fed policymakers. Minneapolis Fed President Neel Kashkari suggested a higher neutral rate, allowing more time before deciding on rate cuts. Conversely, Chicago Fed President Austan Goolsbee does not view strong January US job growth as a reason to delay rate cuts.
Chairman Powell emphasized a careful approach to the timing of rate cuts, highlighting the need for increased confidence before taking such a significant step.
In the absence of major US economic data, Gold traders will closely monitor Fedspeak for fresh insights into the timing and pace of Fed rate cuts. Market sentiment, influenced by ongoing Middle East geopolitical tensions and the US earnings season, will also play a pivotal role.
