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Gold price hits weekly highs amid speculation of Fed rate cuts

Published 20/06/2024, 05:25 pm
© Reuters

Investing.com - Gold prices (XAU/USD) reached a one-week peak in early European trading on Thursday, aiming to reclaim the 50-day Simple Moving Average (SMA) as a key resistance barrier.

Recent US macroeconomic data suggested easing inflationary pressures and a slowing economy, sparking speculation that the Federal Reserve (Fed) may implement two rate cuts this year. This prospect has driven investors towards the non-yielding gold.

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The precious metal also found support in the face of Escalating geopolitical risks in Europe and the Middle East, including Ukrainian drone strikes on Russian energy infrastructure and Israel's warning of an imminent all-out war with Iran-backed Hezbollah.

However, a recent shift towards a more hawkish stance by the Fed, along with the policymakers' continued advocacy for a single rate cut in 2024, may limit further gains for gold.

A rebound in US Treasury bond yields, reviving demand for the US Dollar (USD), could also cap gold's rise.

Recent economic data, including Tuesday's US Retail Sales report indicating lackluster economic activity and weaker US consumer and producer prices, could prompt the Fed to ease monetary policy soon, with market pricing currently indicates a higher likelihood of the first rate cut in September, followed by a potential second cut in November or December.

Concerns about a new French government possibly weakening fiscal discipline are also boosting safe-haven assets, which could help limit significant drops in gold's value.

Investors are now closely watching the Swiss National Bank (SNB) decision and the crucial Bank of England (BoE) policy meeting, which could inject volatility and provide some momentum.

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