Gold price faces a downward trajectory as the US Dollar (USD) rebounds, causing it to trade lower at around $1,970 per troy ounce during Wednesday’s Asian session. The resurgence of the USD poses challenges for gold, with traders factoring in a reduced risk premium from the Israel-Hamas conflict, leading to diminished safe-haven demand for the precious metal.
Meanwhile, the International Monetary Fund (IMF) has revised China’s Gross Domestic Product (GDP) growth projections, forecasting a positive shift in China’s economic landscape. With anticipated growth rates of 5.4% in 2023 and 4.6% in 2024, higher than previous estimates, this could potentially boost gold prices.
Furthermore, the recent decline in US Treasury yields, fueled by an optimistic mood on Wall Street and speculation of the US Federal Reserve (Fed) holding off on interest rate hikes, dampens the demand for safe-haven assets like gold. This sentiment is backed by disappointing data from the Non-Farm Payrolls report and the Fed’s dovish stance in November’s meeting.
While some Fed officials, like Lisa Cook, believe that the current interest rate policy is sufficiently restrictive for maintaining price stability, the US Dollar gained strength after comments from Minneapolis Fed President Neel Kashkari cautioned against prematurely ending the rate hike cycle. Kashkari expressed concerns about the adequacy of current policies in light of a robust economy and potential inflationary rise, suggesting the possibility of additional tightening.
Meanwhile, Chicago Fed President Austan Goolsbee acknowledges progress in managing inflation and hints at shifting the discussion towards determining the duration of maintaining interest rates at the current level.
Investors are eagerly awaiting insights into the potential trajectory of interest rates from Fed Chairman Jerome Powell’s speech at a conference in Washington, DC on Wednesday, hosted by the Division of Research and Statistics. The outcome of Powell’s remarks will likely have significant implications for the future of gold prices as market participants closely monitor the Fed’s stance on monetary policy.