Gold prices ticks lower on Fed rate cut uncertainty, geopolitics and softer USD lend support
By Admin 
The US Dollar Index, which gauges the USD against other major currencies, continues to decline for the second consecutive session as it hovers around 104.10 during the Asian trading hours. This downturn comes despite efforts by Federal Reserve Chair Jerome Powell to manage expectations of a potential rate cut in March and emphasize the importance of monitoring inflation as it nears the 2% target.
Powell’s remarks failed to counteract the impact of subdued US bond yields, which are currently affecting the greenback’s performance. The 2-year and 10-year yields on US Treasury notes stand at 4.39% and 4.02%, respectively, adding pressure on the US Dollar despite the Fed’s cautious stance on monetary policy.
Additionally, comments from Federal Reserve Bank of Cleveland President Loretta Mester hinting at potential interest rate cuts later in the year further contribute to the uncertainty surrounding the USD’s trajectory.
Gold prices are struggling to maintain their upward momentum as they trade slightly lower heading into the European session on Wednesday. Despite a modest decline in US bond yields, which typically weakens the USD and supports gold, the precious metal faces headwinds due to expectations of a hawkish stance from the Federal Reserve (Fed).
Recent remarks by Fed Chair Jerome Powell and other FOMC members, along with incoming strong US macro data, have led investors to dial back their expectations for imminent and aggressive rate cuts in 2024. This has bolstered the USD, hindering gold’s ability to extend gains from the previous session.
Nevertheless, geopolitical tensions in the Middle East and concerns over China’s economic slowdown are providing some support to gold as a safe-haven asset. However, traders remain cautious and are refraining from making significant directional bets as they await clearer signals regarding the timing of potential Fed rate cuts.
Attention is now focused on the upcoming release of US consumer inflation figures next week, which will likely influence gold prices. In the meantime, market participants will closely monitor speeches by Fed officials on Wednesday for further insights into the central bank’s monetary policy stance.
