Gold Price Projections Amidst Dollar Weakness and Geopolitical Tensions

Today’s market evaluation on behalf of Rania Gule Market Analyst at XS.com

26^thMarch 2024

The worth of gold (XAU/USD) rose above its highest degree in two days, nearing $2190 throughout Tuesday’s buying and selling, coinciding with a downward correction within the US greenback. The greenback faces downward strain as Federal Reserve officers develop extra assured in easing inflationary pressures, with their projections of three rate of interest cuts this 12 months regardless of excessive inflation readings in January and February.

From my perspective, traders within the markets at the moment are in search of new alerts concerning inflation expectations to gauge when the Federal Reserve will start to chop rates of interest. The market will intently concentrate on the discharge of the US Personal Consumption Expenditures (PCE) Price Index for February, which shall be revealed on Friday, coinciding with official holidays within the US and Europe, extending market pricing for this knowledge till the start of subsequent week, coinciding with the month-to-month market opening.

Any indicators of financial coverage easing may strengthen gold costs as it might diminish hopes for the Federal Reserve to maintain rates of interest excessive for longer. However, cussed inflation knowledge could negatively impression gold costs because it will increase the chance value of investing in gold. Instead, traders could go for interest-bearing belongings like bonds, which might turn out to be extra enticing on account of rising yields. US 10-year Treasury yields have fallen to 4.24% amid sturdy expectations that the Federal Reserve will start decreasing rates of interest beginning June.

Therefore, merchants and traders are prone to chorus from establishing sturdy new directional positions and could want to attend for extra alerts concerning the trail of rate of interest cuts by the Federal Reserve, which in flip will dictate the path of gold costs, which don’t yield short-term returns. Thus, the market focus will stay on the discharge of the US Consumer Price Index and Personal Consumption Expenditures Index, the popular inflation gauge by the Federal Reserve, on Friday. Additionally, right this moment’s US financial calendar consists of the discharge of Durable Goods Orders, the Consumer Confidence Index, and the Richmond Manufacturing Index, which can present some weak directional momentum for gold merchants.

The US Dollar Index (DXY) has retreated from multi-week highs round 104.50 to hover round 104.20. However, US Treasury yields have barely risen, with the 10-year yield reaching 4.25% right this moment. Caution is warranted when opening any new positions on the gold worth.

From my perspective, the present rise within the yellow steel is attributed to greater expectations for rate of interest cuts in 2024. The Core Personal Consumption Expenditures Index is anticipated to indicate a 0.4% improve each month on Friday, whereas the headline determine is anticipated to rise by 0.3% each month. This coincides with merchants’ expectations of a 70% likelihood of rate of interest cuts in June, up from 65% earlier than the Federal Reserve assembly final week, which can end result within the worth coming into a sideways buying and selling zone within the brief time period.

Geopolitically, Russia not too long ago carried out one in all its largest missile and drone assaults on vitality infrastructure in Ukraine, the widest and fiercest since its invasion of Ukraine over two years in the past, amidst escalating tensions in Gaza, which drag the area into additional rigidity. This coincides with yesterday’s United Nations Security Council decision calling for a direct ceasefire, which has not been complied with to this point. Therefore, rising geopolitical tensions in each Eastern Europe and the Middle East may increase safe-haven flows and undoubtedly profit the rise in gold costs.

However, I consider the way forward for the gold worth will primarily rely upon traders’ and markets’ concentrate on US Consumer Confidence numbers on Friday, Durable Goods Orders, and the FHFA House Price Index launched right this moment. Then the Annual Gross Domestic Product report for the fourth quarter (This fall) of the United States on Thursday, which can make clear the way forward for Federal Reserve financial insurance policies and thus have an effect on worth actions within the monetary markets.