Gold holds steady as risk sentiment improves, Fed’s Powell back in focus

WASHINGTON (June 25) Gold (XAU/USD) is trading within a tight range on Wednesday, as markets continue to show signs of optimism following Tuesday's ceasefire between Israel and Iran.

At the time of writing, Gold is holding above $3,300 during the European session, with volatility remaining subdued. Market focus is now on key US macroeconomic releases and the second day of testimony from Federal Reserve Chair Jerome Powell. 

With tensions in the Middle East appearing to remain subdued, Wednesday’s economic data releases and comments from Powell could serve as an additional catalyst for Bullion.

US New Home Sales data for May, due at 14:00 GMT, could serve as an additional catalyst for the Gold price. This report provides clues into how strongly the US housing market appears to be holding up. 

Meanwhile, Jerome Powell returns to Capitol Hill to speak before the US Senate Committee on Banking, Housing, and Urban Affairs, where any shift in tone or mention of inflation risks could drive interest rate-sensitive assets, including Gold.

Daily digest market movers: Gold price drivers, Fed expectations, risks ahead

• Federal Reserve Chair Powell continues his two-day testimony to Congress on Wednesday, following his appearance before Congress the previous day, during which he answered questions on the economy, inflation, and the potential timing of rate cuts. For Gold, which moves inversely to interest rates and the US Dollar, Powell’s comments are particularly influential. 
• Powell reiterated that the Fed is in "no hurry to cut rates," noting that inflation data has been uneven and that tariff-related price pressures are likely to appear in the data for June or July. 
• Powell’s tone remained consistent with the June 18 Federal Open Market Committee (FOMC) meeting, where policymakers projected two rate cuts in the latter part of the year. Despite that, market participants remain divided on the timing and certainty of those cuts, with pricing still sensitive to incoming data. 
• Powell also added, “If it turns out that inflation pressures do remain contained, we will get to a place where we cut rates sooner rather than later, but I wouldn’t want to point to a particular meeting.” He clarified that a meaningful deterioration in the labor market would also affect the Fed’s decision-making, but emphasized, “We don’t need to be in any rush because the economy is still strong, the labor market is strong.” This underscores the data-dependent stance, keeping Gold sensitive to incoming figures. 
• US consumer confidence data released Tuesday added to that uncertainty. The Conference Board’s Consumer Confidence index fell to 93.0 in June, down from 98.4 in May. A more cautious consumer outlook could imply softer spending ahead, which may weigh on the Fed’s growth projections and influence the timing of interest rate adjustments
• Geopolitical risk has abated for now, with the Israel-Iran ceasefire holding for a second consecutive day. While the situation remains fragile, the lack of new escalations has drawn safe-haven flows away from Gold, placing more emphasis on macroeconomic and policy factors for direction.
•  Looking ahead, the release of US Personal Consumption Expenditures (PCE) data, the Fed’s preferred inflation gauge, on Friday will be critical. A soft print could revive expectations for a near-term rate cut and offer a fresh tailwind for Gold.

FXStreet