Daily digest market movers: Gold price strengthens ahead of Fed Powell’s testimony
- Gold price prints a fresh three-month high slightly above $2,120. The safe-haven demand strengthens as investors seem confident that the Federal Reserve will start reducing interest rates in June. The CME FedWatch tool shows that traders see a little over 52% chance for a rate cut by 25 basis points (bps) in the June meeting. For the upcoming monetary policy meeting on March 19-20, investors see the Fed keeping interest rates unchanged in the range of 5.25%-5.50%.
- The near-term demand for Gold will be influenced by Fed Chair Jerome Powell’s testimony before Congress on Wednesday and an array of United States economic data released later this week.
- Jerome Powell is expected to reiterate that there is no urgency for rate cuts due to resilient economic growth. The Fed isn’t likely to shift from its hawkish stance towards policy normalization until it gets convinced that inflation will sustainably return to the 2% target. The Fed wants to see inflation declining for months as evidence before considering rate cuts.
- On Monday, Atlanta Fed Bank President Raphael Bostic said a strong labor market and decent economic growth have bought time for the Federal Open Market Committee (FOMC) to decide on when rate cuts will be optimal. Bostic added that the Fed is having a “rebounding success” as inflation slowly returns to the desired target without hurting labor demand.
- The US Dollar remains sideways in a narrow range ahead of the US ISM Services PMI for February, which will be published at 15:00 GMT. According to economists, the Services PMI is expected to drop to 53.0 from 53.4 in January.
- The US Manufacturing PMI, released on Friday, was downbeat. A weak Service PMI would raise concerns over economic prospects.
- The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades near a two-day low around 103.70.
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