Gold Price Forecast: XAU/USD rises toward $2,100 on dovish Fed outlook

Gold price trades higher around its three-week high near $2,088 per troy ounce during the Asian session on Thursday. The improved risk appetite due to the potential for rate cuts by the Federal Reserve (Fed) in the first quarter of 2024, is giving rise to the price of the yellow metal.

The return of major shipping firms to the Red Sea suggests a tentative normalization, possibly influenced by the deployment of a multinational task force in the region. Despite this, concerns linger about the potential closure of the Gibraltar Strait by Iran. The complex and dynamic geopolitical situation in the Middle East continues to impact market sentiments and contribute to an increase in the demand for safe-haven assets like Gold.

China's commitment to implementing familiar policy measures, as expressed by the National Development and Reform Commission's (NDRC) Chairman, Zheng Shanjie, is geared towards expanding domestic demand, ensuring a speedy economic recovery, and promoting stable growth. Any positive developments in the Chinese economy are likely to influence the Gold price, causing it to gain ground.

The markets are pricing in more than an 88% probability of a rate cut in March, and they are fully pricing in a rate cut in May, as indicated by the CME Fedwatch tool. This reflects the prevailing expectations among investors for potential monetary policy easing by the Federal Reserve. Additionally, the softer US Core PCE – inflation adds to these expectations, contributing to the belief that the Fed may consider easing its monetary stance to address economic conditions. Investors will likely focus on Thursday's releases of Initial Jobless Claims and Pending Home Sales from the United States.