Gold records winning week amid positive market sentiment

Gold price surged on Friday, driven by retreating Treasury yields and a prevalent optimistic market sentiment. The risk-on pulse also prevailed, and gold attracted investors, defying typical safe-haven asset trends.

Gold price resumed its weekly uptrend and finished the week in the green territory with 1.11% gains, taking advantage of the fall in US Treasury bond yields amid a quiet North American trading session as well as quiet news flow.

Market sentiment adjusted to the Fed’s cautious stance with expectations of significant rate easing by year-end. The XAU/USD exchanged hands at $2,038, up 0.70%, earlier on Friday, and eventually closed at $2035.39 per ounce; up 0.56.

The financial markets are in a risk-on mode, which usually translates to “less” appetite for safe-haven assets. Gold remains underpinned by dropping US Treasury yields, which erased most of its gains, falling three and a half basis points, down to 4.248%. Despite Fed officials delivering a “slightly” hawkish tone recently, this was well received by investors who trimmed bets on Fed interest rate cuts and expect 93 basis points of easing toward the year’s end.

The Federal Open Market Committee (FOMC) minutes for January showed that policymakers remain hesitant to cut rates, adopting a cautious approach amid the latest resurgence of inflationary measures. The US labor market remains strong after the latest Initial Jobless Claims data showed fewer Americans applying for unemployment benefits. The CME FedWatch Tool sees traders expecting the first 25 bps rate cut by the Fed in June 2024, with investors pricing in 95 basis points of easing throughout 2024.

New York Fed President John Williams said the Fed is on track to cut interest rates “later this year,” stating that progress towards the central bank’s 2% target would be “bumpy.” Gold has shifted to a neutral-upwards bias as it hurdles the 50-day Simple Moving Average (SMA) at $2,033.75, opening the door to challenge the $2,050 figure.