Gold (XAU/USD) Rises Amid Speculation on Fed Rate Cuts and Lower US Inflation Expectations

In the Asian trading session on Tuesday, GOLD prices (XAU/USD) showed signs of recovery, moving away from a near three-week low, hovering around the $2,017-2,016 region. This positive shift is primarily attributed to a fall in US Consumer Inflation Expectations, stirring market speculation that the Federal Reserve might initiate interest rate cuts as early as March.

This expectation has led to a more defensive stance for the US Dollar for two consecutive days, subsequently benefitting the non-yielding yellow metal.

However, investors are moderating their expectations for an aggressive policy easing by the Fed, factoring in the resilience of the US labor market and hopes for a stable economy. Hawkish remarks from several Fed officials have further complicated the scenario, introducing uncertainties about early interest rate cuts.

This development supports higher US Treasury bond yields, which could potentially limit any further losses for the USD and cap gains for GOLD .

Additionally, a generally positive sentiment in the Asian equity markets might constrain the appeal of the safe-haven XAU/USD. Traders are also likely to adopt a cautious approach, awaiting the release of the latest US consumer inflation figures on Thursday.

These figures are expected to significantly influence the USD price dynamics and subsequently offer fresh directional impetus to Gold prices.

The latest report from the New York Federal Reserve reveals that US consumers’ short-term inflation projections have dropped to the lowest level since January 2021. Despite this, the anticipated shift in the Federal Reserve’s policy stance is tempered by ongoing strength in the US economy.

Comments from Atlanta Fed President Raphael Bostic and Fed Governor Michelle Bowman have added to the prevailing market uncertainty, suggesting that early interest rate cuts may not be as imminent as some expect.

In terms of technical analysis,

Gold Technical Outlook

GOLD price shows a cautious bullish bias, approaching an initial resistance of 2046.60, influenced by a positive stochastic momentum. However, the 50-day EMA continues to exert negative pressure, indicating chances of a continued correctional bearish trend.

The bearish outlook for GOLD remains valid unless there is a sustained breach above the 2046.60 and 2065.70 levels. The expected trading range for today is between 2015.00 support and 2050.00 resistance, with the overall trend leaning bearish.

Gold Live Chart