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CFD Markets News and Forecasts — 02-06-2024
- Gold price trades softer around $2,325 in Monday’s early Asian session.
- The US PCE price index was not sufficient to prompt the Federal Reserve (Fed) rate cut, weighing on the yellow metal.
- Israeli Prime Minister begrudgingly accepted the US President's plan for a ceasefire in Gaza on Sunday.
Gold price (XAU/USD) edges lower to $2,325 on Monday during the early Asian trading hours. The yellow metal trims gains after the US Personal Consumption Expenditure (PCE) data for April showed price pressures cooled in April. Meanwhile, the ongoing Middle East geopolitical risks might provide some support to gold, traditional safe-haven assets.
The recent US PCE inflation report was not sufficient to prompt a Federal Reserve (Fed) rate cut, and the central bank might need some time to achieve its goal. Investors initially anticipated the first rate cut to come in March, but it got pushed to September. This, in turn, weighs on the precious metal as it increases the opportunity cost of holding the non-yielding asset.
The US PCE price index rose 0.3% MoM in April, while the annual PCE figure increased 2.7% YoY. Both figures came in as expected, according to the Commerce Department, on Friday. Meanwhile, the Core PCE, excluding volatile food and energy, advanced 0.2% MoM in April as compared to a 0.3% gain in March. On an annual basis, the core PCE price index climbed 2.8% for the third consecutive month.
On Sunday, Israeli Prime Minister Benjamin Netanyahu's administration reluctantly agreed to President Biden's proposal for a Gaza cease-fire. The negotiations take place as the attack in Rafah continues after intensive Israeli airstrikes over the weekend, per the BBC. Investors will monitor the developments surrounding the geopolitical tensions. Any signs of escalating risks could boost safe-haven flows, benefiting the gold price.
- AUD/USD trades in positive territory for the third consecutive day around 0.6655 on Monday.
- The US PCE index rose 0.3% MoM in April, matching the expectation.
- The Australian monthly CPI inflation triggered the speculation that the RBA might need to hike again to curb the inflationary pressure.
The AUD/USD pair extends the rally near 0.6655 during the early Asian session on Monday. The uptick of the pair is bolstered by the weaker US Dollar (USD) after the US Personal Consumption Expenditure Price Index (PCE) report showed that inflation cooled faster than expected in April. Investors will shift their attention to Australia’s Gross Domestic Product (GDP) for Q1 on Wednesday and the US Nonfarm Payrolls on Friday.
The US PCE index, the Fed’s preferred measure of underlying US inflation, rose 0.3% MoM in April, matching the expectation, the Commerce Department reported on Friday. On an annual basis, the PCE figure increases by 2.7% YoY, compared to an advance of 2.7% in March. The Core PCE, excluding the volatile food and energy, climbed 0.2% MoM in April as compared to a 0.3% gain in March. On an annual basis, the core PCE price index jumped 2.8% for the third consecutive month.
The April US PCE inflation data indicated inflation in the US remains stubbornly high as in March, raising doubt on how soon it will be able to cut interest rates. Traders were not pricing in rate cuts for the Fed’s June or July meeting, seeing a 50% odds of Fed rate cuts in September, according to the CME FedWatch tool. Fed officials emphasized that they would wait for more evidence that inflation is easing before moving to cut rates and that patience would be needed. Nonetheless, the higher-for-longer US rate narrative might support the Greenback and cap the upside for the pair in the near term.
On the other hand, the Australian Dollar (AUD) attracts some buyers as the monthly inflation rate rose to 3.6%, triggering speculation that the Reserve Bank of Australia (RBA) might need to hike interest rates again. Australia’s monthly Consumer Price Index (CPI) rose 3.6% YoY in April, beating the estimation of 3.4% and the previous reading of 3.5%.
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