Gold price trades sideways as investors seek fresh guidance from Fed on interest rates

NEW YORK (February 6) Gold price (XAU/USD) struggles to find a direction in Tuesday’s European session amid a lack of data drivers as the economic calendar in the United States is light this week. The two-day sell-off in the precious metal has paused for a while as various Federal Reserve (Fed) are lined up to provide their outlook on interest rates. The rally in the US Dollar Index (DXY) has paused, but more upside is likely as Fed policymakers consistently deny the need for early rate cuts.

The chances of aggressive rate cuts by the Fed have sharply diminished as the US economy is outperforming. Fed policymakers have warned that an early rate-cut decision could support demand and boost the economy, which would slow the progress of inflation declining towards the 2% target.

Daily digest market movers: Gold price consolidates ahead of Fed speak

• Gold price finds selling pressure while attempting to extend recovery above the crucial resistance of $2,030.
• The precious metal has fallen as Federal Reserve officials push back expectations of aggressive rate cuts due to resilient domestic growth and a stubborn inflation outlook.
• The CME Fedwatch tool shows that a rate cut in March is unlikely. For May’s policy meeting, bets favoring an interest rate reduction by 25 basis points (bps) have come down to 55%.
• On Monday, Minneapolis Federal Reserve Bank President Neel Kashkari said the lower risk to US economic woes had bought time for the central bank to reconsider rate cuts. 
• Increasing employment levels and robust economic prospects consistently improve hopes of a “soft landing” for the Fed.
• After robust labor market and Manufacturing PMI data for January, the Services PMI also outperformed expectations. The Services PMI represents the service sector, which accounts for two-thirds of the US economy, rose to 53.4 against expectations of 52.0 and the prior reading of 50.5.
• The sub-index gauging new orders for service enterprises rose to 55.0 against expectations of 52.8, indicating a strong order book for 2024.
• On the geopolitical front, hopes for a ceasefire between Israel and Palestine in Gaza could exert more pressure on the Gold price.
• The US Secretary of State Antony Blinken and Saudi's crown prince discussed "regional coordination" on ending the war in Gaza and plans for the strip after the fighting ends, CNN reported.

FXStreet