Gold Prices Hover Near Two-Month High on Rate Cut Hopes

London: 4 March 2024 (TraderMade): Gold prices edged slightly lower on Monday but remained close to a two-month peak, buoyed by rising expectations of an interest rate cut by the Federal Reserve in June.

Key Takeaways

• Gold price hovering near $2,088, close to its highest level since 28 December.
• Recent data indicating a slowdown in the US economy and dovish comments from Fed officials fueled hopes of a rate cut.
• Experts anticipate fed rate cuts by June.
• Lower interest rates generally benefit Gold by increasing the appeal of non-yielding assets.
• Market participants and analysts will closely watch the upcoming US economic data and Fed Chair Jerome Powell's testimony on Wednesday and Thursday for further direction.

Market Analysis

Gold prices witnessed a significant surge last week, gaining roughly $50, primarily fueled by disappointing US manufacturing and construction spending data, alongside easing inflationary pressures. This data, coupled with less hawkish remarks from some Federal Reserve officials, strengthened the narrative of a potential rate cut in June, boosting the appeal of Gold.

However, the price action on Monday was slightly muted, with analysts citing profit-taking and technical resistance as possible reasons for the pause. Additionally, some market participants remain cautious ahead of crucial US data releases and Fed Chair Powell's testimony later this week, which could further clarify the central bank's monetary policy stance.

Gold Price Rallies to Two-Month High Over the Past Week

Gold prices (XAUUSD) experienced a significant upward trajectory over the last week, ending Monday, 4 March 2024, near a two-month high.

Here's a breakdown of the key points:

• Opening price on 26 February: $2031.22
• Closing price on 4 March: $2085.52
• Weekly gain: Approximately $54.30 (2.7%)
• Highest price reached: $2088.39 (1 March)

Many factors influenced the Gold price to drive this upward trajectory, such as:

Weakening US economic data

Disappointing data on manufacturing and construction spending fueled speculation of a potential interest rate cut by the Federal Reserve in June.

Dovish Fed comments

Statements from some Fed officials hinting at a slower pace of tightening further bolstered the case for lower rates.

Increased safe-haven demand

Geopolitical tensions and a cautious risk appetite in the broader market also contributed to the rise in gold prices.

Despite the recent surge, Monday's trading witnessed a slight pullback, possibly due to profit-taking and technical resistance. However, the underlying factors supporting a potential rate cut remain in play, suggesting that gold prices could continue to see support shortly.

Looking Ahead

The near-term trajectory for gold prices will likely depend on several factors, including:

• Upcoming US economic data: The Nonfarm Payrolls report, scheduled for release on Friday, will be closely scrutinized for signs of continued weakness in the US economy.
• Fed Chair Powell's testimony: Market participants will be keen on his insights regarding the future path of interest rates and the central bank's overall monetary policy outlook.
• Global risk sentiment: Any significant shifts in global risk appetite could also influence Gold prices, as the metal is a preferred safe-haven asset during times of uncertainty.

To Summarize

While the immediate future remains uncertain, the underlying factors supporting a potential Fed rate cut continue to keep Gold prices. Whether Gold can sustain its recent gains or experience a correction will depend on how these developments unfold in the coming days.