Gold expected to post gains amid light US economic agenda

Gold is up +0.24% on the day, the precious metal is trading at $1987.31 at the time of writing. The price of gold is fluctuating horizontally during Monday’s US trading session due to the lack of a catalyst, but it is likely to be supported by the weakening US dollar and declining US Treasury bond yields.

During a week with little on the US economic calendar, a risk-on drive keeps the US dollar under pressure. The XAU/USD exchange rate is practically flat at $1983.50 as of this writing. While US bond yields are falling, gold traders are keeping an eye on the Fed’s uncertain stance.

As the week begins, US stocks alternate between gains and losses. The statements of Fed Governor Lisa Cook from last Friday are being heavily relied upon by gold dealers as US Federal Reserve (Fed) officials enter the blackout period. She noted that monetary policy is entering an unpredictable era and stated that challenges facing the banking industry could affect the forecast for rising interest rates. Cook does not make the same claim about core PCE but anticipates a slowdown in PCE inflation in March.

The overall decline in US Treasury yields is continuing to weigh on the dollar. The US Dollar Index (DXY), a gauge of the value of the dollar in relation to a group of other currencies, lost ground, falling 0.22%, and was last noted at 101.507, favouring XAU/USD.

90% of traders, observers and market players anticipate that the US Federal Reserve will increase interest rates by 25 basis points next week. But according to traders, the US Federal Reserve “could” lower rates by September’s meeting and again in December.

As reported over the weekend by the Financial Times, the World Gold Council claimed that central bankers are buying gold as a response of escalating geopolitical tensions. The reports predict that in 2022, central banks would rise by 152% year over year.

On the data front, the Chicago Fed National Activity Index (CFNAI) for March fell to -0.19, exceeding predictions of -20 and remaining unchanged from February’s reading. The three-month moving average increased to 0.01%, up from -0.09 in February, indicating that the economy is still growing more slowly than expected.

The Dallas Fed Manufacturing Business Index in April fell precipitously to -23.4, significantly below the -11.00 predicted value, as the survey revealed that assessments of the overall state of business conditions deteriorated. Order and shipping change rates both increased, but both figures remained negative.

Technically speaking, XAU/USD is swaying around the 20-day EMA, which is currently at $1987.64, indicating that the price of gold is likely to stay flat. Risks are around $1950 on the downside before falling and testing the 50-day EMA at $1946.45.