Gold price (XAU/USD) falls sharply in the late European session on Thursday as uncertainty over the timing of interest rate cuts by the Federal Reserve (Fed) deepens. In the monetary policy speeches this week, none of the Fed policymakers have provided any concrete timeline for rate cuts. The opportunity cost of holding Gold, a non-yielding asset, rises when the Fed holds interest rates high for an extended period. Fed policymakers are considering rate cuts at this stage as “premature.” The Fed needs more good inflation data to gain confidence that price pressures will sustainably return to the 2% target. Also, inflation pressures could flare up again if the Fed goes aggressively for rate cuts. In the early American session, Richmond Federal Reserve Bank President Thomas Barkin advised to be patient for rate changes. Barkin added that he needs to see good inflation numbers being sustained and broadening for rate cuts.
Meanwhile, lower Initial Jobless Claims (IJC) for the week ending February 2 have prompted a recovery in the US Dollar. The US Department of Labor has reported individuals claiming jobless benefits for the first time were at 218K, lower than expectations of 220K and the former release of 228K. Broadly, the United States economic calendar has little to offer this week. The market sentiment has turned downbeat as Israel’s Prime Minister Benjamin Netanyahu has rejected the ceasefire proposal. The Israeli leader said the complete destruction of Hamas is a few months away. Next week, the US inflation data for January will be the key trigger that will provide a fresh outlook on interest rates. The Gold price could face more pressure if the inflation data persistently exceeds expectations. Gold price drops gradually from a three-day high of $2,045. The precious metal is broadly sideways, trading in a narrow range of around $2,030. The overlapping structure between the Gold price and the 20-day Exponential Moving Average (EMA) indicates that volatility has squeezed significantly. Also, the gold price forms a Symmetrical Triangle chart pattern on the daily time frame, demonstrating a sharp volatility contraction. The 50-day EMA at $2,023 continues to cushion the Gold price bulls.