During the early Asian trading hours on Monday, the price of gold (XAU/USD) remained steady around the $2,155 mark. The slight downturn in the yellow metal can be attributed to stronger-than-expected inflation data from the US, which may delay potential interest rate cuts by the Federal Reserve (Fed). However, positive developments regarding stimulus measures from Chinese authorities or robust demand from China could provide support to the gold price.
Recent economic data from the US indicates that inflation levels remain elevated, potentially leading the Fed to maintain its current interest rate stance until there is more evidence of inflation easing. Market expectations suggest that the Federal Open Market Committee (FOMC) will keep interest rates unchanged at its March meeting scheduled for Wednesday, as Fed officials may require additional time to gain confidence in addressing inflation concerns.
Furthermore, a prolonged period of higher interest rates could diminish the attractiveness of non-yielding assets like gold, putting downward pressure on its price.
On the domestic front, the University of Michigan reported weaker-than-expected Consumer Sentiment Index data for March, although inflation expectations remained steady. Additionally, US Industrial Production showed a modest improvement in February, signaling some resilience in the economy.
Over the weekend, China’s finance minister Lan Fo underscored the importance of continuing proactive fiscal policies to support economic recovery. Investors interpreted this as a signal that policymakers may implement further monetary easing measures, potentially including a reduction in bank reserves. Positive developments in the Chinese economy could bolster gold prices, given China’s status as the world’s second-largest economy and a major purchaser of gold.
Looking ahead, gold traders will closely monitor Chinese Retail Sales and Industrial Production data for February, scheduled for release on Monday. The FOMC interest rate decision and subsequent press conference on Wednesday will also be closely watched as they are expected to provide clarity on the future direction of interest rates, thereby influencing the trajectory of the gold price.
