Gold price surges following Powell’s hawkish remarks

Gold prices have risen following Fed Chair Jerome Powell’s hawkish comments and mixed US data. The Middle East tensions have heightened Gold’s status as a safe-haven asset, and market expectations reduce the likelihood of multiple Fed rate cuts this year.

Gold prices edged higher late in Tuesday’s North American session, gaining 0.22% following Powell’s hawkish comments. Economic data from the United States was mixed, but Monday’s Retail Sales report and Powell’s remarks kept US Treasury yields higher, capping the yellow metal’s advance.

Risk appetite has deteriorated amid heightened tensions in the Middle East, with Iran’s attack on Israel set to retaliate even though the White House warned against it. Gold is set to continue advancing, if not because Fed Chair Jerome Powell said that the US economy has performed quite strongly while acknowledging that recent data shows a lack of further progress on inflation.

Traders reduced expectations for the Federal Reserve to cut rates more than once this year, with the first rate cut possible in September. Despite mixed economic indicators, market participants remain focused on strong March US Retail Sales data, which significantly exceeded both forecasts and the previous month’s results.

Gold’s price remains high even though US Treasury yields are climbing more than 5 basis points in the belly and long end of the yield curve. The US Dollar Index (DXY) gains 0.11% to 106.29, levels last seen in November 2023. Gross Domestic Product (GDP) estimates for Q1 2024 show that the US economy is expected to grow 2.9%, up from 2.8% estimated on April 15.

Gold buyers remain in charge despite the Relative Strength Index (RSI) being in overbought levels. Gold is upwardly biased, though the uptrend seems overextended, increasing the risks of a pullback. However, the trend is more likely to continue than reverse.