GOLD PRICE HOLDS STRENGTH AHEAD OF US CORE PCE INFLATION

• Gold price hovers around $2,200, exhibiting strength ahead of US core PCE Price Index data.
• The US Dollar refreshes to a six-week high amid cautious market sentiment.
• 10-year US bond yields rise as Fed rate cut bets for June have dropped.

Gold price (XAU/USD) holds onto gains near $2,200 in Thursday’s European session. The precious metal exhibits firm footing ahead of the United States core Personal Consumption Expenditure (PCE) Price Index data for February, which will be published on Friday. 

The Federal Reserve (Fed) could dial back rate cut expectations if the underlying inflation data suggests price pressures persist. Such a scenario would lead to an increase in yields on interest-bearing assets, such as Treasury bonds, whose appeal strengthens in a high-inflation environment. On the contrary, softer-than-expected inflation could boost expectations for a Fed rate cut in the June meeting, and support the broad narrative of three rate cuts for overall 2024. 

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

The US Dollar Index (DXY), which measures the US Dollar’s value against six major currencies, refreshes to a six-week high at 104.72 amid dismal market sentiment ahead of the release of the Fed’s preferred inflation gauge.