Gold price refreshes three-month high as Fed rate-cut bets for June remain firm

• Gold price climbs above $2,120 as investors expect that the Fed will cut interest rates in June.
• The US Dollar remains on the back foot ahead of Fed Powell’s testimony, NFP data.
• Fed Powell’s guidance on interest rates will influence market expectations for rate cuts in June.

Gold price (XAU/USD) continues its winning spell for the fifth trading session on Tuesday. The precious metal refreshes a three-month high, approaching its all-time high of around $2,145 seen in December 2023. Gold’s advance happens amid a cautious market sentiment and increased bets that the Federal Reserve (Fed) will cut interest rates in the June policy meeting. 

The outlook for Gold price remains uncertain as investors await Fed Chair Jerome Powell’s testimony before Congress on Wednesday and a slew of labor market data from the United States, such as JOLTS Job Openings for January and ADP Employment Change data, which will be announced on Wednesday. 

The commentary from Jerome Powell on the inflation and the interest rate outlook could trim uncertainty associated with the timing of the Fed’s rate cuts. A hawkish guidance on interest rates could weigh on Gold as it will increase the holding cost of investment in non-yielding assets.

Later this week, the US Nonfarm Payrolls (NFP) for February will provide fresh cues on labor demand and wage growth. Apart from keeping inflation under control, reaching maximum employment is a key mandate for Fed policymakers when deciding on interest rates.

Daily digest market movers: Gold price strengthens ahead of Fed Powell’s testimony

• Gold price prints a fresh three-month high slightly above $2,120. The safe-haven demand strengthens as investors seem confident that the Federal Reserve will start reducing interest rates in June. The CME FedWatch tool shows that traders see a little over 52% chance for a rate cut by 25 basis points (bps) in the June meeting. For the upcoming monetary policy meeting on March 19-20, investors see the Fed keeping interest rates unchanged in the range of 5.25%-5.50%.
• The near-term demand for Gold will be influenced by Fed Chair Jerome Powell’s testimony before Congress on Wednesday and an array of United States economic data released later this week.
• Jerome Powell is expected to reiterate that there is no urgency for rate cuts due to resilient economic growth. The Fed isn’t likely to shift from its hawkish stance towards policy normalization until it gets convinced that inflation will sustainably return to the 2% target. The Fed wants to see inflation declining for months as evidence before considering rate cuts.
• On Monday, Atlanta Fed Bank President Raphael Bostic said a strong labor market and decent economic growth have bought time for the Federal Open Market Committee (FOMC) to decide on when rate cuts will be optimal. Bostic added that the Fed is having a “rebounding success” as inflation slowly returns to the desired target without hurting labor demand.
• The US Dollar remains sideways in a narrow range ahead of the US ISM Services PMI for February, which will be published at 15:00 GMT. According to economists, the Services PMI is expected to drop to 53.0 from 53.4 in January. 
• The US Manufacturing PMI, released on Friday, was downbeat. A weak  Service PMI would raise concerns over economic prospects.
• The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades near a two-day low around 103.70.

Technical Analysis: Gold price approaches $2,140

Gold price sees a strong buying interest after it broke out from the Symmetrical Triangle pattern formed on a daily time frame. The breakout of the aforementioned chart pattern exhibits a volatility expansion, which leads to wider ticks on the upside and heavy volume. The precious metal could extend its upside towards the horizontal resistance plotted from the December 4 high at $2,144.48.

The 14-period Relative Strength Index (RSI) holds above 60.00, indicating a bullish momentum ahead. The RSI (14) is not showing any divergence signals but has reached overbought territory.