Gold price has been on a downward trend for the past two days, hitting a one-week low during the Asian session on Wednesday. This drop can be attributed to comments made by Federal Reserve (Fed) Governors Michelle Bowman and Lisa Cook, indicating that the central bank is unlikely to cut rates in the near future due to the strong US economy. As a result, US Treasury bond yields have increased slightly, boosting the US Dollar and putting pressure on gold prices.
Despite this, investors are still considering the possibility of a Fed rate cut in September, especially after weaker inflation data for May. The ongoing geopolitical tensions in the Middle East and the Russia-Ukraine conflict are also supporting the price of gold as a safe-haven asset. Traders are now eagerly awaiting the release of the final US Q1 GDP print and the Personal Consumption Expenditures (PCE) Price Index on Friday to determine their next moves in the XAU/USD market.
Furthermore, Federal Reserve policymakers are divided on the issue of interest rates. While Governor Michelle Bowman is in favor of keeping rates higher for longer to combat inflation, Governor Lisa Cook believes that cutting rates may be necessary at some point. The recent US Consumer Confidence Index showed a slight decrease, reflecting concerns about the economic outlook. This, combined with weak retail sales data and inflationary pressures, keeps hopes alive for a Fed rate cut in September.
Amidst these developments, tensions between Russia and the US, as well as the possibility of conflict between Israel and Lebanon, are further supporting the demand for gold as a safe-haven asset. Traders are wary of making aggressive bets and are looking for cues from the upcoming PCE Price Index release on Friday.
From a technical standpoint, the Gold price is currently facing bearish pressure, with the possibility of dropping below key support levels. However, a sustained break above certain resistance levels could signal a bullish trend for the precious metal.
In conclusion, while the Fed’s hawkish stance and the strong US economy are weighing on the price of gold, ongoing geopolitical tensions and the possibility of a Fed rate cut are providing some support. Traders are advised to closely monitor upcoming economic data releases and geopolitical developments to make informed decisions in the gold market.