Gold Price Forecast: XAU/USD trades higher around $2,020 on investor caution

Gold price continues to move on an upward trajectory, trading higher around $2,020 per troy ounce during the early European session on Monday. The precious metal receives upward support from cautious investor sentiment amid speculation about the Federal Reserve's interest rate policy.

The price of Gold surged as the US Dollar depreciated on San Francisco Federal Reserve (Fed) President Mary C. Daly’s remarks at the Annual National Association for Business Economics Economic Policy Conference. She stated that three rate cuts are a reasonable baseline for 2024. Daly emphasized that it's premature to consider allowing the economy to run without intervention. Additionally, former Fed official James Bullard's suggestion that the Fed should consider lowering interest rates at the March meeting to prevent hindering economic activity due to higher rates is contributing to market sentiment.

However, market sentiment indicates of no rate adjustments in the upcoming Federal Reserve meetings in March and May. According to the CME FedWatch Tool, there is approximately a 52% probability of a 25 basis points (bps) rate cut in June. On Friday, the US Dollar (USD) failed to sustain its gains, which were initially fueled by better-than-expected Producer Price Index (PPI) data from the United States, consequently leading to an increase in Gold price.

The US Producer Price Index (PPI) showed a year-over-year growth of 0.9%, against the expectations of 0.6% and the previous figure of 1.0%. Additionally, there was a monthly improvement of 0.3%, contrasting with the previous decline of 0.1%. However, the preliminary Michigan Consumer Sentiment Index rose to 79.6 from the previous 79.0, although it fell short of the anticipated reading of 80.0.