Gold Surges on Fed Rate Cut Speculation, Traders Eying $2,200

Wednesday’s North American session is witnessing a steady increase in gold prices as buyers aimed for $2,200. Investors purchased the yellow metal due to a quiet economic calendar in the US and growing rumours on a Fed rate cut in June. As of this writing, the XAU/USD pair is up $13. or 0.63%, trading around $2,192.

Interest Cut Expectations Boost Gold’s Rally

A surge in gold prices towards $2,200 is anticipated due to the expectation of a rate decrease by the Fed. The allure of gold as a safe haven is increased by a drop in real yields and a drop in US Treasury yields to 4.19%. Awaiting core PCE statistics and Fed Governor Christopher Waller’s speech were closely watched by traders for possible hints about the path of monetary policy.

The price of the non-yielding metal is supported by the decrease in US Treasury yields. The rate on the US 10-year benchmark note has decreased by four basis points to 4.19%. As a result, the US real yield curve dipped from 1.914% on Tuesday to 1.87% at the time of writing, which is negative for the US dollar.

The non-yielding metal faces resistance from the US Dollar Index (DXY), which tracks the performance of the Greenback versus the other six currencies. It is now trading flat at 104.30.

The only event on the US economic calendar is a speech by Fed Governor Christopher Waller, scheduled for approximately 22:00 GMT. The primary Personal Consumption Expenditures (PCE) data, which is the Fed’s favoured inflation indicator, is expected to be released on Friday. This will be the week’s main event.

Could GDP Data Enhance Gold’s Safe Haven Appeal?

The announcement of the final estimate of the GDP on Thursday, first jobless claims, and University of Michigan consumer sentiment are all scheduled events on this week’s economic agenda.

The federal funds rate (FFR) is expected to be between 5.00% and 5.25% in June if the Federal Reserve cuts rates by a quarter of a percentage point, as predicted by traders. This is a 70% possibility. Although there is disagreement within the Federal Open Market Committee (FOMC) board, Fed officials are still planning to lower rates. Raphael Bostic, the president of the Atlanta Fed, stated that he anticipates one rate drop in 2024 rather than two. Parallel to Bostic’s remarks, Fed Governor Lisa Cook stated that relaxing policy too quickly raises the possibility of inflation becoming entrenched.

President of the Chicago Fed Austan Goolsbee is still dovish and anticipates three rate cuts, but he has stated that he wants more proof that inflation is declining.

PCE Data Awaited

The Core Personal Consumption Expenditure (PCE) Price Index, the Federal Reserve’s favoured inflation indicator, is anticipated to be released to gold traders. In February, the Index is predicted to climb 2.8% YoY, and monthly data are anticipated to decrease from 0.4% to 0.3% MoM.

Technically speaking, the price of gold recovered on Wednesday after plunging to a weekly low of $2,163 on Monday. This was aided by purchasers, who drove up the price of the yellow metal to around $2,200. The Relative Strength Index (RSI), aiming higher, suggests that bullish momentum builds, If traders clear the aforementioned level, a test of the all-time high at $2,223 is on the cards.

However, if sellers drive prices below the high of December 4th, which turned into support around $2,146, it would intensify a sell-off and drive XAU/USD prices down below $2,100. The high of $2,088 from December 28 would be the next support.