Gold declines, still within bullish zone on rate cut bets

Gold prices are gaining momentum for 2024, with prospects of a Fed interest rate reduction starting in March.

Factors boosting rate-cut hopes include a 2% decline in underlying inflation and easing labor market conditions due to restrictive monetary policy. However, the precious metal faces a marginal sell-off as the US Dollar advances further, with the USD Index reaching near 102.00 and 10-year US Treasury yields reaching 3.96%.

This week, investors are expected to face volatility as various economic indicators are released, including the ISM manufacturing PMI, JOLTS Job Openings data, and Federal Open Market Committee (FOMC) minutes of the December monetary policy meeting.

At the time of writing, the precious metal is trading down -0.17% at $2059.71 per ounce. Earlier on Tuesday, gold price faced a nominal sell-off near $2,075 due to further recovery in the US dollar. The broader prospects are still upbeat, with a 72% chance that the Fed will reduce interest rates by 25 basis points to 5.00-5.25%.

Also, earlier on Tuesday, gold price climbed above Friday’s high, supported by expectations of early rate cuts by the Fed. The precious metal surrenders some gains amid decent recovery in the US Dollar and is expected to extend further towards the previous week’s high near $2,090.