The XAU/USD is currently trading at multi-month highs, surpassing $2,115, as investors continue to analyze last week’s weak inflation and economic activity figures from the US. Market expectations for a potential rate cut are starting to increase as we move closer to May and significantly gain traction by June.
Gold, being a non-yielding asset, is benefiting from the prevailing uncertainties in the market. The recent soft Core Personal Consumption Expenditures (PCE) figures for January and the weak Institute for Supply Management (ISM) Manufacturing Purchasing Managers Index (PMI) for February have contributed to the precious metal’s upward momentum. These data releases raised concerns about an economic slowdown in the US.
Despite the softer economic data, Federal Reserve (Fed) officials remain steadfast in their stance, affirming the possibility of three rate cuts in 2024, likely commencing in June. This determination by the Fed may pose a potential challenge to gold’s continued ascent, especially if markets solidify their expectations for a rate cut in June. In such a scenario, a boost in US Treasury yields could limit the upside potential for the precious metal.
Investors are closely eyeing the critical labor market data from the US expected later this week. The overall market sentiment and reactions to economic indicators will likely play a crucial role in shaping the trajectory of gold prices in the coming days.
