In the early New York session on Wednesday, Gold prices (XAU/USD) experienced a notable upswing, showcasing strong buying interest. This development occurred even as Federal Reserve (Fed) policymakers signaled their reluctance to lower interest rates in the first half of 2024. Traditionally, higher interest rates are viewed as unfavorable for non-yielding assets like Gold, as they elevate the opportunity cost associated with holding the precious metal.
Investors keen on deciphering the timing of potential rate cuts will be closely monitoring the release of the United States core Personal Consumption Expenditure price index (PCE) data for January, scheduled for Thursday. Market expectations regarding rate cuts may be adjusted based on the underlying inflation data, with the possibility of a more persistent inflationary trend having the potential to trigger a downturn in Gold prices.
On the geopolitical front, tensions between Israel and Hamas have escalated, with both nations downplaying expectations of an imminent ceasefire. Adding to the complexities, Hamas, backed by Palestine, announced the launch of several rockets towards northern Israel.
Despite the release of downbeat US Durable Goods Orders data for January earlier in the week, which indicated a 6.1% decline compared to the projected 4.5%, Gold prices failed to register significant gains. This slump in fresh orders for durable goods is seen as a concerning signal, hinting at a less optimistic outlook for consumer spending.
