Gold reaches all-time highs awaiting core PCE inflation in the US

• The price of Gold is around $2,220, showing strength ahead of the US Core Consumer Price Index (PCE) data.
• The US dollar rebounds to six-week highs amid market caution.
• US 10-year bond yields rise as Fed rate cut bets for June have fallen.

The price of Gold (XAU/USD) remains above $2,200 in the final hours of the European session on Thursday. The precious metal remains firm ahead of U.S. personal consumption expenditure (PCE) price index data for February, due out on Friday.

The Federal Reserve (Fed) could lower rate cut expectations if core inflation data suggests price pressures persist. This scenario would cause yields on interest-bearing assets such as Treasuries to rise, the appeal of which is strengthened in a high-inflation environment. Conversely, softer-than-expected inflation could boost expectations of a Fed rate cut at the June meeting, and support the overall narrative of three rate cuts for the whole of 2024.

The Fed is expected to maintain a cautious approach to rate cuts, as starting them too soon or lowering them too much could reinforce price pressures again. Meanwhile, a delay in cutting interest rates could put unnecessary pressure on the labor market and the economy.

The US Dollar Index (DXY), which measures the value of the dollar against six major currencies, rebounds to a six-week high of 104.72, amid discouraging sentiment in the markets ahead of the release of the US's preferred inflation gauge. the Fed.

Daily Market Summary: Gold Price Rises, US Dollar Hits Six-Week Highs

• Gold price surpasses $2,200 ahead of the release of the February Core PCE Price Index. The Federal Reserve's preferred inflation gauge is expected to have grown at a steady 2.8% annually. The monthly core inflation figure is expected to have increased by 0.3%, slowing down from the 0.4% increase in January. Investors will be closely watching inflation data to gauge when the Fed may begin cutting interest rates.
• Inflation data could allow the Fed to maintain hawkish rhetoric. Fed policymakers have reiterated that rate cuts are only appropriate when they are convinced that inflation will sustainably return to the 2% target. In turn, persistent price pressures would weaken the attractiveness of Gold, as the opportunity cost of investing in it would increase.
• According to CME's FedWatch tool, traders are pricing in a 60% chance of a rate cut being announced in June. The odds of the Fed pivoting to a rate cut in June have fallen from 70% on Thursday following slightly hawkish guidance from Fed Governor Christopher Waller.
• In a speech Wednesday at the Economic Club of New York, Christopher Waller said the Fed should not rush into cutting rates. However, he is keeping hopes alive for rate cuts: “Further progress in reducing inflation is expected, so it will be appropriate for the Fed to begin reducing the target range for the federal funds rate this year.” “reported Reuters.

Technical analysis: Gold is trading above $2,200

Gold price is trading near the crucial resistance of $2,200. The precious metal aims to regain all-time highs slightly above $2,220. All short-term to long-term exponential moving averages (EMAs) are sloping upwards, suggesting strong short-term demand.

Gold price could face a hurdle near $2,250, which coincides with the 161.8% Fibonacci extension, after breaking above the $2,220 resistance. The Fibonacci tool is plotted from the December 4 high at $2,144.48 to the December 13 low at $1,973.13. On the downside, the December 4 high at $2,144.48 will support gold price bulls.

The 14-period Relative Strength Index (RSI) rebounds after cooling to 64.00 from the extreme overbought zone.