Mon. May 20th, 2024

GOLD PRICE EXTENDS RECORD-SETTING RUN DESPITE REDUCED FED RATE CUT BETS, POSITIVE RISK TONE

By Mahesh Limbani Apr 8, 2024

Gold price builds on the recent breakout momentum and touches a fresh record high on Monday.

cut underpin the USD and might cap gains amid the risk-on mood.
Dip-buying should limit any corrective slide ahead of the US CPI and the FOMC minutes this week.

Gold price (XAU/USD) attracts some dip-buying in the vicinity of the $2,300 mark during the Asian session on Monday and hits a fresh all-time peak in the last hour. Expectations that the Federal Reserve (Fed) will eventually start cutting rates in 2024, along with buying from the Chinese central bank, have been significant drivers of the precious metal’s blowout rally over the past two weeks or so. That said, extremely overstretched conditions on the daily chart might hold back traders from placing fresh bullish bets amid easing geopolitical tensions and a positive risk tone, which tends to undermine the safe-haven precious metal.

Meanwhile, the upbeat US monthly employment details released on Friday suggested that the Federal Reserve (Fed) may delay cutting interest rates and force investors to scale back their expectations for three rate cuts in 2024 to two. The outlook keeps the US Treasury bond yields elevated and acts as a tailwind for the US Dollar (USD), which, in turn, might further contribute to capping the upside for the non-yielding Gold price. Investors might also prefer to move to the sidelines ahead of this week’s release of the US consumer inflation figures for March and the FOMC meeting minutes on Wednesday.

Daily Digest Market Movers: Gold price draws support from expectations for lower interest rates and central bank buying

A buying spree by China’s central bank, along with expectations that lower US interest rates are on the horizon, pushed the Gold price to a fresh record high on the first day of a new week.

Official data released Sunday showed that bullion held by the People’s Bank of China rose by 0.2% to 72.74 million troy ounces last month, marking the 17th consecutive month of increase.

The markets have been pricing in an even chance that the Federal Reserve (Fed) will start its rate-cutting cycle at the June policy meeting, which further benefits the non-yielding yellow metal.

The global risk sentiment got a boost after Israel withdrew more soldiers from southern Gaza and committed to fresh talks on a potential ceasefire, easing geopolitical tensions in the Middle East.

The US Bureau of Labor Statistics (BLS) reported on Friday that Nonfarm Payrolls (NFP) increased by 303K in March vs the 200K expected and the previous month’s downwardly revised reading.

Other details of the publication showed that the Unemployment Rate edged lower to 3.8% from 3.9% in February amid a rise in the Labor Force Participation Rate to 62.7% from 62.5% previously.

The data forced investors to scale back their expectations for a total number of rate cuts in 2024 to two as against three rate cuts projected by the Fed, which pushes the US Treasury bond yields higher.

The rate-sensitive two-year US government bond and the benchmark 10-year Treasury note surged to a four-month peak on Friday, underpinning the USD and capping gains for the commodity.

Traders now look to the release of the US consumer inflation figures for March and the FOMC meeting minutes on Wednesday for cues about the Fed’s rate-cut path and a fresh directional impetus.

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