In Thursday’s early American session, the gold price (XAU/USD) witnessed a decline from fresh all-time highs around $2,220, driven by a strong rebound in the US Dollar and US Treasury yields. The US Dollar Index (DXY), which gauges the Greenback’s strength against six major currencies, rebounded to 103.50 following a decline observed post-release of the Federal Reserve’s (Fed) dot plot.
The upwardly revised forecasts for the Gross Domestic Product (GDP) and the annual Core Personal Consumption Expenditure Price Index (PCE) for 2024 have contributed to limiting the downside of the US Dollar, reflecting an improving US economic outlook. Additionally, 10-year US Treasury yields rebounded to 4.27% as the Fed refrained from providing a concrete timing for rate cuts.
Earlier, the gold price surged to all-time highs amidst speculation over Fed rate cut hopes for June, fueled by projections from the quarterly updated dot plot of March’s policy meeting indicating that three rate cut projections for this year remain on the table. Comments from Fed Chair Jerome Powell further bolstered demand for gold, as he expressed confidence that underlying inflation is easing despite sticky February inflation numbers. The firm expectations for the Fed to reduce interest rates have diminished the opportunity cost of holding investments in non-yielding assets like gold.
