Gold (XAU/USD) prices remained buoyant around $2,315 on Monday, supported by market expectations of two Federal Reserve (Fed) rate cuts this year. This optimism stems from softer-than-expected US inflation data and the recent S&P Global PMI report indicating a moderate slowdown in cost growth.
Market Dynamics: Inflation, Fed Projections, and Geopolitical Risks
- Inflation Expectations: While recent US inflation data has been encouraging, Fed officials remain cautious about the pace of disinflation, highlighting the potential for further interest rate adjustments.
- Rate Cut Speculation: Market participants are increasingly betting on two rate cuts this year, contrasting with the Fed’s projected single cut. This divergence is creating volatility and uncertainty in the gold market.
- Geopolitical Tensions: The Russia-North Korea security pact has added to global tensions, potentially boosting demand for safe-haven assets like gold and limiting its downside potential.
Economic Data and Fed Speak:
Chicago Fed Bank President Austan Goolsbee expressed optimism about further declines in inflation, which could pave the way for policy easing. However, he emphasized the need for consistent data before lowering interest rates. Investors are eagerly awaiting the revised Q1 GDP data and the core Personal Consumption Expenditure (PCE) price index for May, the Fed’s preferred inflation gauge, to gain further insights into the central bank’s policy trajectory.
Technical Analysis: Gold Consolidates Above 50-Day EMA
Gold is currently consolidating within a $2,277-$2,450 range, with the 50-day Exponential Moving Average (EMA) acting as a strong support level. The Relative Strength Index (RSI) remains neutral, indicating indecision among market participants.
A break below the May 3 low of $2,277 could trigger further downside towards the March 21 high at $2,223. Conversely, a decisive move above the May 20 high of $2,450 would open the door for a potential upward surge into uncharted territory.