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Gold price holds onto gains even though Fed avoids speculation over rate-cut timing

Gold price (XAU/USD) aims to come out of the woods in Wednesday’s early New York session. Gold, a non-yielding asset, is both supported and capped by the fact that whilst the Federal Reserve is poised to make rate cuts, uncertainty remains over their timing. Fed policymakers are holding back from unwinding the restrictive monetary policy stance too aggressively due to the current strength in labor demand and upbeat household spending.

The US Dollar Index (DXY), which is negatively correlated to Gold price, have eased despite the fact the Fed is unlikely to cut interest rates in March – something that would usually weigh on the Gold. Even expectations for a rate cut in May have decreased significantly as the Fed lacks evidence that inflation will slow sustainably to its 2% target. Fed policymakers are worried premature action on interest rates could flare up price pressures again, cautioning that the last mile in taming price pressures is always tricky.

Meanwhile, Minneapolis Federal Reserve President Neel Kashkari said the central bank needs more months of good inflation data to attain confidence that inflation will return to the 2% target. Kashkari speculated that two or three rate cuts seem appropriate this year.

Going forward, speeches from Fed policymakers’ Richmond Federal Reserve Bank Thomas Barkin and Federal Reserve Governor Michelle Bowman will be of utmost importance.

Souce: Fxstreet