Gold Price Forecast: XAU/USD remains confined around $2,030 amid firmer USD, geopolitical tensions

Gold price (XAU/USD) consolidates in a narrow trading band around $2035 region per troy ounce during the early Asian trading hours on Friday. Meanwhile, the US Dollar Index (DXY), an index of the value of the USD measured against a basket of six world currencies, recovers above the 104.00 mark. The US Treasury yields edge higher, with the 10-year yield standing at 4.16%.

A decline in US Initial Jobless Claims highlights the resilience of the economy and might convince the Federal Reserve (Fed) to refrain from cutting rates in the short term. Data released from the US Department of Labor reported on Thursday that US weekly Initial Jobless Claims dropped to 218K for the week ended February 3 from 227K in the previous week, above the market consensus of 220K. Continuing Claims fell by 23K to 1.891M in the week ended January 27.

Richmond Fed President Tom Barkin said the central bank should be patient on rate cuts despite remarkable data showing that inflation is dropping. Minneapolis Fed President Neel Kashkari stated on Wednesday that he believes two or three rate cuts will take place in 2024, while Fed Governor Adriana Kugler said that the need for further data to confirm inflation is heading back to the central bank’s 2% target. 

Investors looked into recent comments from Fed officials, which implied fewer rate cuts for 2024 than initially anticipated. This, in turn, weighs on the yellow metal as the high-for-longer narrative in the US diminishes the incentive for investors to buy gold as it pays no interest, thus resulting in a lower gold price.

On Thursday, Israeli troops attacked areas in Rafah, the southern border city where more than half of Gaza's population is hiding, a day after Prime Minister Benjamin Netanyahu rejected a proposal to end the war, reports Reuters. The rising geopolitical tensions in the Middle East could benefit traditional safe-haven assets like gold. 

Looking ahead, Dallas Fed L. Logan is scheduled to speak later on Friday. In the absence of top-tier economic data from the United States, risk sentiment is likely to play a significant influence on the gold price.