Hopes of an interest rate cut by the Federal Reserve at the June policy meeting keep the US Dollar bulls on the defensive and continue to act as a tailwind for the non-yielding Gold price amid geopolitical risks.
The US CPI report released on Tuesday indicated some stickiness in inflation, which might force the Fed to stick to its higher-for-longer narrative and hold back the XAU/USD bulls from placing fresh bets.
Investors remain concerned about geopolitical risks stemming from the prolonged Russia-Ukraine war, and the Israel-Hamas conflict, which further seems to benefit the precious metal’s safe-haven status.
Russian President Vladimir Putin said on Wednesday that it would be considered a significant escalation of the conflict if the US sent troops to Ukraine and that Moscow was ready for a nuclear war.
An Israeli attack hit a UN aid distribution centre in Rafah, while Lebanon’s Hezbollah said two of its fighters were killed in the Bekaa Valley after Israel launched a strike on the area for a second straight day.
A report from US news site Politico noted that senior US officials have told their Israeli counterparts that the Biden administration will support the targeting of high-value Hamas targets in and underneath Rafah.
The uncertainty over the Fed's rate-cut path keeps the US Treasury bond yields elevated, which helps limit any meaningful USD fall and should cap any meaningful appreciating move for the precious metal.
Traders now look to Thursday's US macro data – monthly Retail Sales, the Producer Price Index and Weekly Jobless Claims – for some impetus, though the focus remains on next week's FOMC policy meeting.
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