Gold price trades inside Tuesday’s trading range around $2,025 as investors await the FOMC minutes of the first monetary policy meeting of 2024 to get more insights about the timing of rate cuts.
The near-term outlook of Gold is bullish due to deepening Middle East tensions.
Persistent attacks from Iran-backed Houthis on commercial vessels in the Red Sea have escalated geopolitical tensions. Safe-haven assets tend to attract higher foreign inflows in times of geopolitical uncertainty.
Signs of the Fed’s willingness to keep interest rates higher for longer in the FOMC minutes could contribute further to the positive appeal for Gold.
The opportunity cost of holding non-yielding assets, such as Gold, increases when the Fed maintains interest rates higher.
Meanwhile, the US Dollar Index (DXY), which measures the Greenback’s value against six major currencies, has rebounded strongly from a fresh weekly low of around 103.80.
The solid USD Index’s recovery indicates uncertainty among market participants ahead of the FOMC minutes.
Market expectations for Fed rate cuts will guide further action in safe-haven assets.
As per the CME FedWatch tool, traders see a 54% chance for a 25 basis point (bp) rate cut in the June policy meeting.
This week, market participants will also focus on the preliminary S&P Global PMI data for February, which will be released on Thursday.
The Manufacturing PMI is forecasted to come out lower to 50.5 in February from 50.7 in January. The Services PMI, which represents sectors that account for two-thirds of the US economy, is expected to stand at 52.0, lower than the prior reading of 52.5.
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