The price of gold (XAU/USD) witnessed a modest recovery, but its trajectory remains on the downside as the US Dollar continues to regain its footing. Despite a relative easing of geopolitical tensions, the bullion faces pressure from a strengthening greenback and surging long-term bond yields.
Investors have been closely monitoring the Federal Reserve’s stance on interest rates and inflation, with all eyes now turning towards the upcoming speech by Fed Chairman Jerome Powell. Anticipation lingers as Powell is expected to provide crucial insights into the Fed’s plans regarding interest rate hikes and their strategy to combat inflation.
The conflicting viewpoints within the Federal Reserve itself further complicate the market outlook. While Fed Governor Lisa Cook deems the current interest rate policy sufficient to tame inflation, Minneapolis Fed Bank President Neel Kashkari’s recent comments suggest a lean towards further rate hikes, citing a strong labor market and the need for continued price stability.
The recent correction in the gold market is anticipated to reach a conclusion soon, instilling hope among investors for a potential revival. This optimism is buoyed by a slowdown in labor demand and a decline in the Services PMI, underpinning the expectation that the Fed might refrain from further interest rate hikes.
While the yellow metal has found temporary support near $1,960.00 after a sharp downturn, technical analysis indicates a broader bullish trend as the 200-day EMA continues to slope higher. However, momentum oscillators suggest a weakening bullish momentum, keeping the outlook cautious.
Market participants eagerly await the speeches of other Fed policymakers, including Christopher Waller and John C. Williams, in the lead-up to Powell’s address. Additionally, the performance of the 10-year US Treasury yields near the 4.60% mark is being closely monitored, adding to the anticipation surrounding Powell’s impending guidance on interest rates and the overall economic performance in the fourth quarter of 2023.
As the precious metal remains caught in a tug of war between the US Dollar’s resurgence and the Federal Reserve’s impending policy decisions, the market braces itself for further volatility in the days ahead.