Gold Stalls for Direction as Investors Eye Fed Cues

London: 27 March 2024 (TraderMade): Gold prices are stuck in neutral this week, hovering below the $2,200 mark. The metal's performance is caught in a tug-of-war between two key factors: expectations for Federal Reserve interest rate cuts and the health of the US dollar.

Key Takeaways

• Gold is in a holding pattern, lacking clear direction due to conflicting forces.
• The Fed's future rate cut decisions are paramount for gold's price movement.
• The US dollar's strength, influenced by economic data and inflation, is pressuring gold prices.

Gold (XAUUSD) Stalls After Early Weekly Rally

Gold prices for the week ending 27 March 2024 exhibited a choppy trajectory, failing to maintain gains made earlier in the week. While the week began with a climb, reaching a high of $2,222.92 on 21 March, prices subsequently retreated, closing the week at $2,179.65.

Weekly Price Movement

• Monday, 20 March: Gold opened the week at $2,158.07 and climbed to $2,188.89 by day's end.
• Tuesday, 21 March: Prices surged further, reaching a weekly high of $2,222.92.
• Wednesday-Friday, 22-26 March: The price action turned choppy, with gold oscillating within a range and failing to break higher decisively.

Fed Policy in Focus

Market participants are waiting for signs of the Fed's monetary policy direction, particularly regarding potential rate cuts. The Fed's projection of three cuts by year-end is positive for gold, but recent US data hinting at a strong economy casts doubt on this plan.

Upcoming US PCE Price Index data on Friday is crucial for gauging the Fed's next move and impacting the dollar's strength, which in turn affects gold prices.

Dollar's Influence

A robust dollar makes gold more expensive for other currency holders, limiting its appeal. Recent positive US economic data, like durable goods orders, is boosting the dollar. Sticky inflation might force the Fed to maintain higher interest rates for longer, further supporting the dollar.

Looking Ahead

The upcoming release of the US PCE Price Index data on Friday, 29 March, is likely to be a major driver of gold prices in the coming days.

If the data suggests persistent inflation, the Fed might be less inclined towards rate cuts, potentially weakening the dollar and providing a lift to gold. Conversely, cooler inflation figures could strengthen the dollar and put renewed downward pressure on gold prices.