Gold Price Forecast: XAU/USD flirts with record highs above $2,230, all eyes on US PCE data

Gold price (XAU/USD) flirts with record highs around $2,230 during the Asian session on Friday. The uptick of yellow metal is bolstered by the safe-haven flows amidst growing economic concerns and the prospect of interest rate cuts from the US Federal Reserve (Fed). However, the easing expectations for the Fed rate cuts might lift the US Dollar (USD) and cap the upside of USD-denominated gold. 

Gold gains momentum as investors anticipate three rate cuts from the US Federal Reserve (Fed) this year. The Fed held its benchmark overnight borrowing rate in a range between 5.25%-5.50% for the fifth consecutive time last week. Furthermore, the central bank still expects three quarter-percentage point cuts by the end of the year. According to the CME FedWatch Tool, traders are currently pricing in nearly 63% odds that the Fed will cut interest rates in June. It’s worth noting that lower interest rates generally weaken the USD, making gold cheaper to investors holding other currencies.

Furthermore, the ongoing geopolitical risk in the Middle East might boost traditional safe-haven assets like gold. The Palestinian Red Crescent said that Israeli forces besieged two more Gaza hospitals on Sunday, pinning down medical teams under heavy gunfire.

On the other hand, a combination of hawkish Fed comments and robust US economy data might weigh on the gold price. Many Fed officials remain cautious about easing too soon. On Wednesday, Fed Governor Christopher Waller said that there was “no rush” to Fed bank President Raphael Bostic stated that he now sees just one quarter-point rate cut this year, down from the two cuts that he had previously estimated. 

Most markets are closed for Good Friday, but the US February Personal Consumption Expenditures Price Index (PCE) data will take center stage on Friday. The Core PCE, Fed's preferred inflation gauge, is projected to show an increase of 0.3% in February.