During early Asian trading hours on Tuesday, the price of gold (XAU/USD) extended its upward movement beyond the mid-$2,150 mark. This surge comes amidst expectations of interest rate cuts by the US Federal Reserve (Fed) in 2024, coupled with dovish remarks from Fed officials, which have weighed on the US Dollar (USD) and provided support to the US Dollar-denominated gold. At present, the gold price is trading at $2,171, marking a 0.04% increase for the day.
Meanwhile, the US Dollar Index (DXY), reflecting the value of the USD against a weighted basket of currencies utilized by US trade partners, has retreated from multi-week peaks of 104.50 and is hovering around 104.20. Concurrently, US Treasury bond yields have seen a slight uptick, with the 10-year yield currently standing at 4.25%.
The uptrend in the price of gold is largely attributed to heightened expectations of a rate cut in 2024. However, market participants are eagerly awaiting the US Personal Consumption Expenditures Price Index (PCE) data for February, scheduled for release on Friday, to confirm the timing of potential rate cuts. Projections indicate that the headline PCE is anticipated to show a 0.4% month-over-month increase, while the Core figure is expected to rise by 0.3% month-over-month. Traders have priced in a 70% probability of a June rate cut, compared to 65% prior to the Fed’s March meeting last week.
In addition to monetary policy considerations, geopolitical tensions have also influenced market sentiment. Russia reportedly conducted one of its largest missile and drone attacks on Ukraine’s energy infrastructure overnight into Friday, escalating tensions in Eastern Europe. Such developments could bolster safe-haven flows and further benefit the price of gold.
Looking ahead, market participants will closely monitor key economic indicators, including US Consumer Confidence by the Conference Board, Durable Goods Orders, and the FHFA’s House Price Index on Tuesday. Later in the week, attention will turn to the release of the US Gross Domestic Product Annualized for the fourth quarter (Q4) on Thursday, followed by the US PCE report on Friday.
