- Gold price sticks to modest recovery gains near $1,993 on the weaker USD, lower bond yields.
- The upbeat US January inflation data reinforced the Federal Reserve’s (Fed) cautious approach to rate cuts in 2024.
- The rising geopolitical tension in the Middle East might benefit the yellow metal.
- Traders will keep an eye on the US Retail Sales, due on Thursday.
Gold prices (XAU/USD) holds below the $2,000 psychological mark during the early Asian session on Thursday. The stronger-than-expected US inflation data exerts some selling pressure on the yellow metal, but a fall in US bond yields and a weaker USD could provide little support to the commodities. The gold price currently trades around $1,993, gaining 0.13% on the day.
Meanwhile, the US Dollar Index (DXY), which measures the value of the USD relative to a basket of global currencies, retraces from a three-month high of nearly the 105.00 mark and hovers around 104.70. The US Treasury yields edge lower, with the 10-year yield standing at 4.26%.
The stronger-than-expected US inflation data reinforced the Federal Reserve’s (Fed) cautious approach to rate cuts in 2024. Fed Vice Chair for Supervision Michael Barr said that the Federal Open Market Committee (FOMC) remains confident that US inflation is on the way to hitting the central bank’s 2% target, but he needs to see continued good data before advocating for rate cuts. Barr added that he fully supports a careful approach to considering policy normalization given current conditions.
Fed Chair Jerome Powell and several Fed officials said the central bank wants to see more good data and confirm the direction of inflation before easing monetary policy. Following these remarks, the markets are now pricing in a nearly 80% odds that the Fed will cut rates in June, dialing back previous bets the central bank would begin cutting rates in May, according to the CME FedWatch Tool. It’s worth noting that the high interest rate diminishes the appeal of non-yielding metals as it increases competition from higher-yielding investments.
Apart from this, Israel launched extensive and lethal airstrikes in southern Lebanon on Wednesday, in response to a deadly missile attack on northern Israel. Israeli leaders have warned that they would take considerably stronger military action in Lebanon if the cross-border violence continues. The ongoing geopolitical tension in the Middle East might boost the price of gold, the traditional safe-haven asset.
Market players will focus on US Retail Sales, which is estimated to drop by 0.1% in January. Additionally, the US Philly Fed Manufacturing Index, Industrial Production, and weekly Initial Jobless Claims will be due on Thursday. Traders will also take more cues from the FOMC’s Bostic and Waller speeches. These events could give a clear direction to the gold price.