In the early hours of Tuesday’s Asian trading session, the gold price continues to stand its ground, hovering around the $1,930 mark, marking the fourth consecutive day of gains. The spotlight is now on the impending decisions of major central banks, with expectations running high.
One noteworthy factor boosting gold’s value is the retracement of the US Dollar (USD). Market participants are exercising caution in light of the looming Federal Reserve (Fed) meeting scheduled for Wednesday, where the likelihood of interest rates remaining unchanged has tempered the market sentiment. Investors are closely scrutinizing the central bank’s statements, searching for any hints or insights into potential future interest rate movements.
The markets have already priced in a 25 basis point rate hike by the end of 2023. Furthermore, the resilience exhibited by recent US economic data is reinforcing the notion that the Fed may opt to maintain higher interest rates for an extended duration, which could place a constraint on the gold’s growth potential.
As of the current moment, the US Dollar Index (DXY), which assesses the USD’s performance against a basket of six major currencies, is struggling to maintain its position at approximately 105.10. Concurrently, US Treasury yields are poised to extend the losses incurred on Monday, with the yield on the 10-year bond slipping to 4.30% at the present time. These subdued yields are eroding the Greenback’s strength.
Taking a cue from the European Central Bank’s (ECB) recent actions, the Bank of England (BoE) is expected to implement a cautious 25 basis point interest rate hike during its upcoming meeting on Thursday, with a particular focus on potential risks associated with stagflation.
Meanwhile, market participants are pricing in the likelihood that the Bank of Japan (BoJ) will continue to maintain its highly accommodative monetary policy stance.