Trade Optimism Amid Geopolitical Tensions

US inflation data shows a drop in the CPI to 2.3% in April, with core CPI rising 2.8% year-over-year. Expectations for Fed rate cuts influence USD behaviour, offering support against significant losses in Gold.

No major economic releases are expected from the US on Wednesday, making risk sentiment and Fed official speeches vital for short-term Gold trading. Technically, Gold’s support is near the 200-period EMA at $3,225; a break could signal a bearish trend, while resistance lies around the $3,265-3,266 region.

The Federal Reserve’s monetary policy outlook is shaped by inflation and employment targets, influencing interest rates and USD attractiveness. Measures like QE and QT impact USD value, with QE usually weakening and QT strengthening the currency.

Positioning Ahead Of Policy Shifts

At present, the price of Gold remains relatively stable during the European trading hours. It’s hovering above the $3,200 mark, which may initially appear strong, but in context, that stability seems more like a pause than a signal of firm control by buyers. The recent uptick in risk appetite has diverted attention towards stock markets, undermining demand for traditional hedges. That optimism, largely led by warmer tones in global trade discussions, adds momentum to equities while weighing on metals that thrive in uncertainties.

What’s been holding the metal from slipping lower is the modest pullback we’re seeing in the US Dollar. It hasn’t quite tumbled but is certainly off its previous highs. Speculation around future interest rate cuts by the Federal Reserve, now increasingly eyed for 2025 rather than this year, is responsible for this cooling. This reevaluation is steering the Dollar sideways, offering some support to zero-yield assets like Gold. It’s worth pointing out that when there’s less yield in the pipeline, the comparative cost of holding Gold reduces slightly, softening the downward pressure.

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