The price of gold (XAU/USD) encountered difficulties in capitalizing on its recent recovery from the $2,150 area or the weekly low, facing selling pressure on Thursday. This downward movement follows a hot US inflation report, which has fueled speculations that the Federal Reserve (Fed) may opt to delay interest rate cuts. Consequently, elevated US Treasury bond yields have supported the US Dollar (USD), contributing to the downward pressure on the non-yielding yellow metal.
Despite the prevailing speculation, markets continue to price in a higher likelihood of the US central bank initiating interest rate cuts in June. This expectation might temper the bullish momentum of the USD, preventing aggressive bets from USD bulls. Moreover, geopolitical tensions arising from the prolonged Russia-Ukraine conflict and conflicts in the Middle East could offer some support to the safe-haven appeal of gold.
Furthermore, investors may adopt a cautious stance ahead of the highly anticipated two-day Federal Open Market Committee (FOMC) meeting scheduled to commence next Tuesday. The outcome of this meeting could provide further clarity on the Fed’s monetary policy stance, influencing market sentiment and gold prices.
In summary, while gold prices face selling pressure in the near term due to speculation surrounding Fed interest rate decisions and USD strength, factors such as geopolitical risks and anticipation of the FOMC meeting may limit the extent of downward movement. Investors will remain vigilant for developments that could impact market dynamics and gold’s safe-haven status.
