Gold prices are trading within a narrow range below the $2,200 mark, displaying a bullish bias. The market is influenced by various factors pulling in different directions. There is uncertainty regarding whether the Federal Reserve will proceed with three interest rate cuts this year, which has lifted the US Dollar and capped gains for gold. Traders are also adopting a cautious stance ahead of the release of the US PCE Price Index data on Friday.
Gold price, represented by XAU/USD, has maintained its position within a tight trading band during the European session on Wednesday. The Federal Reserve’s indication of a potential 75 basis points interest rate cut in 2024 supports gold. However, positive US Durable Goods Orders data suggests a robust US economy, potentially leading to prolonged higher interest rates, which supports the US Dollar and limits upside movements in gold.
Traders are exercising caution and refraining from making significant directional bets until they know more about the Fed’s rate-cutting trajectory. Therefore, attention remains focused on the upcoming release of the US Personal Consumption and Expenditure (PCE) Price Index, which is expected on Friday. This data is crucial in shaping near-term US Dollar dynamics and determining the short-term direction of gold prices.
In summary, gold traders are currently on the sidelines amidst uncertainty surrounding Fed rate cuts. Factors such as escalating tensions between Russia and Ukraine and geopolitical risks in the Gulf of Aden and the Red Sea add to the cautious sentiment. Positive economic data in the US, particularly in Durable Goods Orders and the Consumer Confidence Index, coupled with rising inflation expectations, contribute to the cautious outlook. Technical analysis suggests a potential bullish breakout above $2,200 or a corrective decline with support levels around $2,164-2,163 and $2,156-2,155.