GOLD PRICES RISE AS THE FED MAINTAINS ITS CONFIDENCE IN REDUCING INFLATION.

As the US dollar weakens and attention turns to the US core PCE inflation report, gold prices soar to $2,190.

The Fed is confident that inflation is generally declining even in light of recent strong readings.

US yields fall as expectations that the Fed would lower interest rates starting in June rise.

As the US dollar corrects, the gold price (XAU/USD) increased during the European session on Tuesday, breaking through a two-day high above $2,190. The US dollar is facing pressure to weaken because Federal Reserve (Fed) policymakers seem to be growing more confident about easing price pressure, despite robust inflation statistics in January and February. This year, three interest rate reductions are projected.

Investors look for new signs about the future for inflation in order to guess when the Federal Reserve might start cutting interest rates. Market players will be closely observing the core Personal Consumption Expenditure price index (PCE) numbers for February in the United States when they are issued on Friday.

If indications of easing pricing pressures dissipate expectations that the Fed would stick with higher interest rates for a while, gold prices might increase. However, persistent inflation figures will damage the value of gold by raising the cost of investing in it. As an alternative, investors can decide to put their money into bonds or other interest-bearing assets, whose value would improve due to higher yields. As of this writing, there were strong expectations that the Fed will start cutting interest rates in June, which caused the yield on the 10-year US Treasury to drop to 4.24%.

MARKET MOVERS FOR THE DAY'S DIGEST: GOLD PRICES SOAR AS THE US DOLLAR CORRECTS.

· A little drop in the US dollar's value causes gold prices to soar to $2,190. Precious metal prices skyrocket in response to the Federal Reserve's move to lower interest rates in June amid growing signs that inflation is moving in the right direction. The US Dollar Index (DXY), which assesses how much the US dollar is worth in relation to six major currencies, falls from a one-month high of 104.50 to 104.10.

· The price pressures in 2024's first two months proved to be hotter than expected, but the Fed still has faith in its ability to reduce inflationary pressures. “The current low rate of increase on new rental leases suggests that it will continue to fall, even though housing-services inflation remains quite high,” Federal Reserve Governor Lisa Cook said on Monday at an event held by Harvard University. In response to a query regarding monetary policy easing, Cook advocated for caution.

· In a separate interview with Yahoo Finance on Monday, President Austan Goolsbee of the Chicago Fed noted that growing house inflation is creating uncertainty in the inflation scenario. But he is sure that the underlying story of inflation reaching the 2% target has not changed.

· Last Thursday, the Federal Reserve reaffirmed its plan to lower interest rates three times this year. This has reinforced the market's belief that the Fed will cut interest rates at its policy meeting in June. According to the CME FedWatch tool, there's a 70% chance that a rate decrease will be announced in June. The odds were 60% before the Fed's policy announcement last week. The slide in the price of gold has been limited by expectations of a larger rate decrease by the Fed.

· This week, investors' focus will shift to the February core PCE price index data to get further insight into the potential timing of a rate cut by the Fed. The annual core PCE measurement is predicted to have risen by 2.8% over time. The monthly inflation estimates are expected to rise by 0.3%, which is less than the 0.4% increase that was recorded in January.

TECHNICAL ANALYSIS: THE PRICE OF GOLD FINDS STABILITY AROUND $2,160

The gold price recovers to $2,190 according to momentum oscillators. The 14-period Relative Strength Index (RSI) steadily increases after plunging to 64.00. Last week, the price of gold had a notable decline from its record high of $2,223 as a result of oscillators displaying overbought indications.

The 20-day Exponential Moving Average (EMA) at $2,145 has an upward slope, indicating that short-term demand for gold is strong.

Gold may face upward resistance at $2,250, the level of the 161.8% Fibonacci extension. The Fibonacci tool indicates that the high was at $2,144.48 on December 4 and the low was at $1,973.13 on December 13. On the down side, the December 4 high of $2,144.48 should provide support for the gold price bulls.