Gold rebounds on US dollar, yield weakness after Fed’s dovish tilt.

Gold prices climbed on Monday, buoyed by a weaker dollar and bond yields as markets awaited U.S. inflation data due this week to ascertain the Federal Reserve’s policy path after a dovish spin last week.

Spot gold was up 0.2% at $2,021.50 per ounce. U.S. gold futures were flat at $2,036.10.

“The softer U.S. dollar at the start of the week is helping gold pare some of Friday’s declines,” said Exinity Chief Market Analyst Han Tan.

“Spot gold should find itself in a tremendously supported environment as long as the Fed can follow through with the anticipated rate cuts in 2024; the sooner the better for bullion bulls.”

The Fed signaled that the historic tightening of monetary policy over the last two years is at an end, and held interest rates steady last week.

However, New York Fed President John Williams pushed back against surging market expectations of rate cuts, saying “we aren’t really talking about rate cuts right now” at the Fed and added it’s “premature” to speculate about them.

Markets are pricing in about a 70% chance of a Fed rate cut in March, according to CME FedWatch tool.

Benchmark U.S. 10-year Treasury yields were hovering near their lowest level since July, while the dollar also edged down.

Lower bond yields and interest rates reduce the opportunity cost of holding non-interest-bearing gold.

Traders now await a slew of U.S. economic data, including the November core personal consumption expenditure (PCE) index report on Friday.

“The U.S. PCE deflators, due before the Christmas weekend, are expected to adhere to the disinflationary trend, which in turn should buffer bets for Fed rate cuts in 2024, likely translating into further support for gold prices in the interim,” Tan added.

Source: CNBC