Gold Price Forecast: XAU/USD strives for direction as uncertainty over Fed rate cuts deepen

NEW YORK (May 8) Gold price (XAU/USD) struggles for a direction in Wednesday’s London session. The precious metal is stuck in a tight range slightly above the crucial support of $2,300.

The yellow metal is up marginally by 0.10% despite a strong recovery in the US Dollar. Generally, the appeal for dollar-denominated Gold weakens when the US Dollar rises. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, recovers to 105.50. A hawkish guidance from Minneapolis Federal Reserve (Fed) Bank President Neel Kashkari on interest rates, delivered on Tuesday, boosted the US Dollar’s appeal.

Neel Kashkari said he wants to see multiple positive inflation readings, which could build confidence that inflation is on course to return to the desired rate of 2%, before moving to a policy normalization stance. Kashkari supported keeping interest rates steady for the entire year as progress in the disinflation process has stalled due to the strong housing market.

No progress in speculation for a ceasefire between Israel and Palestine has kept the Gold price well-supported. Israel is looking to extend its military activities to Rafah, the southern part of Gaza, where it believes that displaced Palestinians have been sheltered.

The expectations of an Israel-Palestine truce soften after Israel denied the ceasefire proposal, which was agreed by Palestine. Historically, worsening geopolitical tensions improve demand for safe-haven assets, such as Gold.

FXStreet