During the early Asian session on Monday, the gold price (XAU/USD) softened, hovering around $2,335. This decline follows the recent release of U.S. economic data, which unveiled persistent inflationary pressures, triggering doubts in the market about the potential for imminent rate cuts by the U.S. Federal Reserve (Fed). With the Fed’s interest rate decision scheduled for Wednesday, attention is laser-focused on possible policy adjustments.

Simultaneously, the U.S. Dollar Index (DXY) has fallen to 106.00, measuring the USD’s value against a basket of major U.S. trade partner currencies. Furthermore, U.S. Treasury bond yields have also dropped, with the 10-year yield decreasing to 4.667%.

The latest data unveiled on Friday indicated that the headline and Core Personal Consumption Expenditures (PCE) Price Index for March conformed to expectations, with a 0.3% month-over-month increase. However, annual headline inflation for March surged to 2.7% year-over-year from February’s 2.5%, surpassing the anticipated 2.6%. Core PCE inflation also exceeded expectations, rising by 2.8% year-over-year compared to the forecasted 2.6%.

In response to this report, futures markets have adjusted their forecasts, now signaling a nearly 60% chance that the Fed will cut interest rates at its September meeting, an uptick from previous estimates according to the CME FedWatch tool. However, prevailing sentiment anticipates that the Fed will uphold its policy rate within the existing range of 5.25%–5.5% this Wednesday, maintaining a lack of urgency regarding rate cuts. This outlook could potentially dampen the allure of non-yielding assets like gold, potentially exerting downward pressure on gold prices.

Furthermore, continuing geopolitical tensions are influencing the dynamics of the gold market. Over the weekend, Hamas revealed its contemplation of a new Israeli proposal for a ceasefire in Gaza, coinciding with a heightened effort by Egypt to mediate an agreement between Israel and Hamas, as reported by The Guardian. The gold market is closely monitoring these developments, recognizing that any escalation in Middle Eastern tensions could bolster the appeal of gold as a traditional safe-haven asset.

Disclaimer: The information provided in this research report is for informational purposes only and should not be interpreted as financial or investment advice. The precious metals market is highly volatile, and readers should conduct thorough research before making any investment decisions.