Daily digest market movers: Gold price advances while US Dollar falls back
- Gold price rises to $2,190, aiming to recapture all-time highs of $2,223. Investors remain gung-ho for Gold as expectations for the Federal Reserve to begin rate cuts from the June policy meeting have strengthened.
- The CME FedWatch tool shows that there is almost a 70% chance that a rate-cut cycle will get started in June. Last week, bets for the Fed lowering key borrowing rates from June were dashed by hot consumer price inflation readings. However, the release of the latest dot plot – which pointed out that officials still expect three rate cuts in 2024 – has renewed hopes of upcoming rate cuts.
- The Fed is confident that the underlying story of inflation easing to 2% has not changed despite back-to-back stubborn Consumer Price Index (CPI) data in the first two months of 2024. However, the Fed didn’t offer any cues about when it could start cutting rates.
- This week, the release of the United States core PCE price index data for February will provide fresh cues about Fed rate cut timing. Uncertainty over the timing of rate cuts could deepen if the inflation data turns out hotter than expected.
- Core PCE is estimated to have grown steadily by 2.8%, with monthly growth declining to 0.3% from 0.4% in January. A stubborn inflation data would dampen the Gold’s appeal as hot inflation figures could delay the Federal Reserve’s plans to reduce interest rates. On the contrary, soft inflation figures could hit the US Dollar and US bond yields, supporting demand for Gold.
- But before that, investors will focus on the speech from Fed Governor Christopher Waller, who will speak at 22:00 GMT about the US economic outlook before the Economic Club of New York. Investors will keenly focus on fresh guidance on interest rates.
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