During early Asian trading hours on Monday, the price of gold (XAU/USD) maintained its position above the mid-$2,100s, driven by increasing speculation that the US Federal Reserve (Fed) may initiate rate cuts later in the year. Currently trading around $2,168, gold has gained 0.15% for the day.
The recovery of the yellow metal is primarily supported by growing expectations that the Fed could begin cutting rates, particularly after Fed Chairman Jerome Powell hinted at the possibility of three interest rate cuts in 2024. This outlook has spurred investor demand for gold, pushing prices higher. According to the CME FedWatch Tool, investors have priced in a 72% probability of rate cuts starting in the June meeting, up from 65% prior to the recent rate decision.
Additionally, escalating geopolitical tensions in Ukraine are contributing to safe-haven flows, further bolstering the appeal of gold. Over the weekend, a Russian missile attack targeted an underground gas storage facility in Ukraine, exacerbating the situation. Ukrainian President Volodymyr Zelenskiy confirmed ongoing efforts to restore power supply, particularly in Kharkiv, Ukraine’s second-largest city.
Looking ahead, gold traders will closely monitor the release of US Gross Domestic Product (GDP) numbers for the fourth quarter (Q4), which are expected to remain steady at 3.2%. Stronger-than-expected GDP data could provide support to the Greenback and potentially weigh on US Dollar-denominated gold. It’s worth noting that markets will be closed for Good Friday at the end of the week.
