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Gold Price Forecast: XAU/USD recovers some lost ground below the mid-$2,000s

  • Gold price holds positive ground around $2,030 on Tuesday.
  • The FOMC minutes and the December Nonfarm Payrolls report show monetary policy caution is still needed.
  • The US Consumer Price Index (CPI) on Thursday will be in the spotlight this week.

Gold price (XAU/USD) recovers some lost ground below the mid-$2,000s during the early Asian session on Tuesday. The possibility that the US Federal Reserve (Fed) might extend its restrictive stance for longer might exert some selling pressure on the yellow metal in the near term. However, gold traders will take more cues from the US Consumer Price Index (CPI) on Thursday for fresh impetus. The gold price currently trades near $2,030, 0.14% on the day.

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, hovers around 102.28 after facing a rejection from a multi-week high of 103.10. The Treasury yields edge lower, with the 10-year yield standing at 4.02%.

The FOMC minutes and the December Nonfarm Payrolls report show monetary policy caution is still needed. The market anticipates that the US economy will remain robust in the fourth quarter (Q4) and in 2024, which certainly wouldn’t require five to six rate cuts from the Fed this year. This, in turn, might boost the US Dollar (USD) and cap the upside for the USD-denominated gold.

On Monday, Atlanta Fed President Raphael Bostic stated that with inflation still above the 2% target and his view is for monetary policy to remain tight even though overall risks in the economy have become balanced between those posed by rising prices and those posed by slower employment growth. Furthermore, Fed Governor Michelle Bowman said that the current policy stance appears sufficiently restrictive. However, she remains willing to raise the federal funds rate further at a future meeting if the incoming data indicate that progress on inflation has stalled or reversed.

This week’s inflation data will provide some fresh impetus. The US Consumer Price Index (CPI) will be released on Thursday. The headline CPI figures are projected to rise 0.2% MoM and 3.2% YoY, respectively. The Core CPI, which excludes volatile food and energy prices, is expected to rise 0.2% MoM in December.

 

Australia’s Retail Sales rise 2.0% MoM in November vs. -0.2% prior

Australia’s Retail Sales, a measure of the country’s consumer spending, improved 2.0% MoM in November from the previous reading of a 0.2% drop, according to the official data published by the Australian Bureau of Statistics (ABS) on Tuesday.
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Australian Dollar gains ground on improved risk appetite, upbeat Aussie Retail Sales

The Australian Dollar (AUD) continues to gain ground, extending its gains for the third successive session on Tuesday.
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