Gold Price Forecast: XAU/USD trades on a softer note below $2,350 on hotter-than-expected US inflation data

Gold price (XAU/USD) trades on a softer note near $2,335 on Monday during the early Asian session. The recent US economic data showed that US inflationary pressures staying firm, which has added further to market doubts about near-term US Federal Reserve (Fed) rate cuts. On Wednesday, the Federal Reserve's (Fed) interest rate decision will be a closely watched event. 

Meanwhile, the US Dollar Index (DXY), a measure of the value of the USD against a weighted basket of currencies used by US trade partners, drops to 106.00. The US Treasury bond yields edge lower, with the 10-year yield falling to 4.667%.

On Friday, the headline and Core Personal Consumption Expenditures (PCE) Price Index for March were in line with expectations, rising by 0.3% MoM. The annual headline inflation came in at 2.7% YoY in March from 2.5% in February, hotter than the 2.6% expected. Core PCE inflation increased by 2.8% YoY, above expectations of 2.6%. 

Futures markets have priced in nearly 60% odds that the Fed will cut the interest rate at its September meeting, slightly more than before the report, according to the CME FedWatch tool. The US Fed is anticipated to keep the policy rate in its current 5.25%–5.5% range on Wednesday and to continue to signal no urgency on cuts. The hawkish stance in market sentiment could diminish the appeal of non-yielding metals and weigh on the gold price. 

On Saturday, Hamas said that it was reviewing a fresh Israeli proposal for a cease-fire in Gaza. It came as Egypt intensified its attempts to secure an agreement between Israel and Hamas to halt the conflict and avoid an Israeli military invasion into the southern Gaza city of Rafah, per the Guardian. Gold traders will monitor the development surrounding the geopolitical risks in the Middle East. Any escalating tensions might boost traditional safe-haven assets like gold.