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Gold price faces pressure as hopes for an interest rate cut by the Fed

Gold price (XAU/USD) falls back on Monday as investors reconsider the outlook on interest rates by the Federal Reserve (Fed). Policymakers are consistently supporting the tight interest rates narrative to ensure the return of inflation to the 2% target in a sustainable manner. The precious metal is facing some sell-off as the prospect of imminent rate cuts fades amid still-high price pressures due to robust consumer spending and full employment conditions. Meanwhile, the absence of fresh cues about Middle-East tensions has also trimmed the appeal for bullions.

Investors should brace for a sharp volatility ahead amid a data-packed week. The US Dollar Index (DXY) hovers near the crucial support of 103.00 ahead of the release of key economic indicators such as preliminary Q4 Gross Domestic Product (GDP) data and core Personal Consumption Expenditure (PCE) price index for December. Gold price drops gradually to near $2,020 as bets supporting a rate-cut decision by the Fed in March have eased significantly. The precious metal struggles to regain traction as the 20-day Exponential Moving Average (EMA) around $2,031 is consistently acting as a barricade for bulls. Going forward, a sideways performance is highly likely as investors await the crucial economic data due later this week, which is expected to provide a fresh outlook on inflation and the interest rate outlook.