Gold price holds onto gains even though Fed avoids speculation over rate-cut timing

• Gold price aims more upside $2,030 while the US Dollar falls from a seven-week high.
• Fed policymakers abstain from offering timing for rate cuts.
• Considering the upbeat labor market, the Fed is expected to achieve a soft landing.

Gold price (XAU/USD) aims to come out of the woods in Wednesday's early New York session. Gold, a non-yielding asset, is both supported and capped by the fact that whilst the Federal Reserve is poised to make rate cuts, uncertainty remains over their timing. Fed policymakers are holding back from unwinding the restrictive monetary policy stance too aggressively due to the current strength in labor demand and upbeat household spending.

The US Dollar Index (DXY), which is negatively correlated to Gold price, have eased despite the fact the Fed is unlikely to cut interest rates in March – something that would usually weigh on the Gold. Even expectations for a rate cut in May have decreased significantly as the Fed lacks evidence that inflation will slow sustainably to its 2% target. Fed policymakers are worried premature action on interest rates could flare up price pressures again, cautioning that the last mile in taming price pressures is always tricky.

Meanwhile, Minneapolis Federal Reserve President Neel Kashkari said the central bank needs more months of good inflation data to attain confidence that inflation will return to the 2% target. Kashkari speculated that two or three rate cuts seem appropriate this year.

Going forward, speeches from Fed policymakers’ Richmond Federal Reserve Bank Thomas Barkin and Federal Reserve Governor Michelle Bowman will be of utmost importance.

Daily Digest Market Movers: Gold price eyes more upside as Fed sees two or three rate cuts appropriate this year

• Gold price attempts to recapture two-day high near $2,040 while investors await fresh guidance from Federal Reserve policymakers over inflation and interest rates.
• The economic indicators for January released so far have indicated that the United States is outperforming expectations, which signifies a persistent inflation outlook.
• The US economic calendar is light this week, therefore investors are focusing on speeches from Fed policymakers for fresh cues about when the central bank will begin reducing interest rates.
• The speech from Cleveland Federal Reserve Bank President Loretta Mester delivered on Tuesday indicated that deepening uncertainty over inflation is not allowing policymakers to offer any timing for rate cuts.
• Loretta Mester said a robust labor market and resilient household spending have allowed the Fed to keep interest rates restrictive, giving them time to gather evidence about inflation declining sustainably to the 2% target.
• Mester added that the Fed is looking to bring down interest rates, and the forecast of three rate cuts this year is intact.
• Philadelphia Federal Reserve Bank President Patrick Harker didn’t provide any cues about easy policy in his prepared remarks. However, he said the Fed is making “real progress” in bringing inflation down to 2%, and the path to a “soft landing” is very much in sight. A soft landing is when a central bank manages to achieve price stability without triggering a recession.

Technical Analysis: Gold price seems comfortable above $2,030

Gold price trades sideways above $2,030 amid an absence of major economic events this week, while speeches from Fed policymakers will keep investors busy. The precious metal turns sideways after a sharp recovery from a weekly low of around $2,015. The yellow metal oscillates inside Monday’s trading range for the second straight session, which indicates a sharp volatility contraction. The asset is hovering near the 20-day Exponential Moving Average (EMA), which trades around $2,033.