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Gold extended its rally on Tuesday, hitting $2,042 per ounce by late afternoon as comments from Federal Reserve officials cemented beliefs that inflation is moderating and the central bank will likely start cutting interest rates in 2024.
Fed Governor Christopher Waller, seen as a policy hawk, said “good arguments” exist that rates could be lowered if inflation keeps falling over several more months. This hasn’t been endorsed by the Fed yet, but traders are already pricing in a 75% chance of a rate cut by May. As a result, we saw selling in the US dollar while bonds, stocks and gold drew buyers.
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US dollar continues to slide
A triple-top pattern has kept gold capped below $2,080 since 2020. But now bullion looks ready to take a fourth crack at breaching that threshold if dollar weakness continues.
Where the precious metal goes next could be dictated by US data especially Friday’s PCE inflation report, for clues on US growth and policy. Signs of cooling inflation would limit the Fed’s scope for higher rates, aiding gold. Economic jitters could also spur safe-haven inflows.