03.01.2024 – Gold price drops further as bets in favour of early rate cuts by the Fed drop slightly

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Gold price (XAU/USD) turned negative on Wednesday amid caution ahead of the Federal Open Market Committee (FOMC) minutes and crucial data from the United States, namely the Institute for Supply Management (ISM) Manufacturing PMI for December and JOLTS Job Openings data for November.

The commentary from Richmond Federal Reserve (Fed) Bank President Thomas Barkin has weighed heavily on the Gold prices. Fed Barkin said inflation is progressively declining towards 2% inflation along with healthy economic prospects. Barkin added that the case of a ‘soft landing’ is highly likely but will have some risks associated such as high-interest rates on credit, outside shocks, services inflation getting stuck at a high levels and demand remaining strong, which will keep chances of additional rate hikes on the table. The precious metal faces selling pressure as investors reconsider their bets in favour of a rate cut by the Fed in March. An absence of significant discussions about rate cuts by Fed policymakers in the FOMC minutes will dampen the near-term appeal for Gold and support the US Dollar (USD) and Treasury yields.

On the economic data front, the ISM PMI is expected to signal that the US manufacturing sector remained in a contraction trajectory for the 14th month in a row. Meanwhile, higher job postings by US employers will indicate a steady labor demand. Gold price has extend its downside to weekly low below $2,040 after failing to sustain above the $2,080 resistance. The precious metal breaks down ahead of crucial US events after failing to find support near . Upward-sloping 20-day and 50-day Exponential Moving Averages (EMAs) indicate that the overall trend is still bullish.


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