Daily Digest Market Movers: Gold price is pressured by delayed Fed rate cut bets, downside seems limited
- The US Dollar registered its first weekly decline for 2024, which, along with increasing demand for traditional safe-haven assets, lifted the Gold price to over a two-week high on Friday.
- The growing conviction that the Federal Reserve will wait until the June policy meeting before cutting interest rates keeps a lid on any further appreciating move for the non-yielding yellow metal.
- The January FOMC meeting minutes released last week revealed that policymakers generally agreed that they needed greater confidence in falling inflation before considering cutting rates.
- Adding to this, a number of prominent Fed officials recently suggested that imminent interest rate cuts are unlikely as the central bank aims to bring inflation back to the 2% annual target.
- The US Treasury bond yields retreated from a fresh YTD peak touched last week, though remain well supported by the Fed's hawkish outlook and continue to act as a tailwind for the US Dollar.
- Investors, meanwhile, remain concerned about geopolitical risks stemming from conflicts in the Middle East and the Russia-Ukraine war, which could lend some support to the safe-haven XAU/USD.
- Israel expressed its intentions to expand its operations to destroy Hamas amid the uncertainty over a ceasefire, while Russia is preparing a new offensive against Ukraine starting in late May or summer.
- US and UK fighter planes carried out strikes on Houthi sites in Yemen on Saturday amid sustained attacks by the Iran-backed Houthi rebels on commercial vessels in the important Red Sea trade route.
- Ukraine's President Volodymyr Zelensky said on Sunday that Russia is preparing a new offensive against the country starting in late May or summer and Kyiv has a clear battlefield plan of its own.
- Investors now await this week's key US macro data, including the Core PCE Price Index, for clues about the Fed's future policy decision before placing fresh directional bets around the commodity.
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