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Feb 19
2024

Gold price jumps as Fed sees progress in inflation declining towards 2%

Gold price continues its winning spell for the third session in a row on Monday despite waning expectations of rate cuts by the Federal Reserve (Fed) before the June monetary policy meeting.

Gold price extends its recovery for the third straight trading session even though the Fed is maintaining its hawkish rhetoric due to sticky price pressures. The precious metal reverses to the 20-day Exponential Moving Average (EMA), which trades around $2,022. The outlook for the Gold price could turn bullish if it manages to sustain above the 20-day EMA. 

The downward-sloping trendline from December 28 high at $2,088 may continue to act as a barrier for the Gold price. The 14-period Relative Strength Index (RSI) oscillates in the 40.00-60.00 range, which shows a sideways outlook for the Gold price.

 

Fundamental Overview

Gold price (XAU/USD) continues its winning spell for the third session in a row on Monday despite waning expectations of rate cuts by the Federal Reserve (Fed) before the June monetary policy meeting. The precious metal maintains strength even though sticky Consumer Price Index (CPI) and Producer Price Index (PPI) data for January have prompted prospects of persistent core Personal Consumption Expenditure price index (PCE) data.

Investors believe that the reasoning behind higher Gold price is less significant PPI data for January as prices moved up due to some seasonal adjustment problems. In addition to that, Fed policymakers have considered the surprise rise in the latest consumer price inflation data as a one-time blip, emphasizing the longer trend, which indicates that inflation is moving decisively down.

Meanwhile, the forecast from Atlanta Federal Reserve Bank President Raphael Bostic that progress in underlying measures of inflation could allow the Fed to start reducing interest rates from summer has eased opportunity cost of holding non-yielding assets such as Gold. 

 
 

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