Gold Price Demonstrates Resilience, Stalling Near $2,040 Amid Dovish Fed Signals

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Denver, Colorado — Gold prices exhibit a notable resurgence for the second consecutive day, gaining positive traction and hovering near the $2,040 hurdle. This follows a robust recovery from a three-week low around the $1,973 area, where the 50-day Simple Moving Average (SMA) provided substantial support.

The Federal Reserve’s (Fed) announcement on Wednesday has been a pivotal factor driving the precious metal’s recent performance. The Fed conveyed a dovish stance, signaling a pause in interest rate hikes and projecting three 25 basis points rate cuts in 2024, as indicated by the “dot plot.” Policymakers expressed confidence in inflation nearing the Fed’s 2% annual target without a recession, fostering a decline in US Treasury bond yields and a consequent depreciation of the US Dollar (USD).

Despite the USD selling bias extending into Thursday’s Asian session, the risk-on environment somewhat tempers the upward momentum of Gold, capping its ascent near the $2,040 supply zone. Traders are adopting a cautious approach ahead of the upcoming monetary policy updates by the Swiss National Bank (SNB), the Bank of England (BoE), and the European Central Bank (ECB) scheduled for later today. Additionally, market participants are keenly awaiting the release of US monthly Retail Sales data, which might further influence Gold’s trajectory.

The Fed’s commitment to maintaining interest rates at a 22-year high and their revised projection of the fed funds rate peaking at 4.6% in 2024 (down from September’s 5.1%) have significantly shaped market expectations. Wednesday’s data revealing a deceleration in the rise of average business prices to suppliers in November added to the narrative.

Markets are now factoring in a substantial probability of a rate cut at the Fed’s March meeting, with nearly a 60% chance. The odds of a May rate cut stand at 90%, emphasizing the shift in sentiment post-FOMC.

While the benchmark 10-year US government bond yield touches its lowest level since August, the yield on the two-year Treasury note reflects the market’s expectations with its weakest level since July. The post-FOMC USD selling trend is reinforcing Gold’s position, yet the risk-on sentiment moderates further gains.

The impending central bank announcements and the US monthly Retail Sales data are expected to contribute to increased volatility in the Gold market, providing traders with potential opportunities.

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