Gold price struggles to deliver a decisive move as investors are uncertain about Fed rate cuts.

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• Gold price struggles to deliver a decisive move as investors are uncertain about Fed rate cuts.
• Investors shifted focus toward the US inflation data, which will be published next week.
• Middle East tensions continue to offer growth to safe-haven Gold.

Gold price (XAU/USD) stays inside Thursday’s trading range as investors shift focus toward the United States Consumer Price Index (CPI) data for January, which will be released on Tuesday. The inflation data will provide more cues about when the Federal Reserve (Fed) could start reducing interest rates. The sooner interest rates fall, the better it will be for Gold price, which will lower the opportunity cost of holding a non-yielding asset.

As Fed policymakers consistently emphasize keeping interest rates restricted until they get more evidence that inflation will sustainably return to 2% and labor market conditions remain upbeat, investors are losing confidence in the Fed easing interest rates from May. The CME FedWatch tool shows that the chances favoring a rate cut by 25 basis points (bps) in May have fallen to 51%.

When considering cutting interest rates, the Fed consistently observes its dual mandate of easing price pressures and full employment. US labor market conditions are upbeat as weekly jobless claims are consistently declining. For the week ending February 2, individuals claiming jobless benefits for the first time were at 218K, lower than expectations of 220K and the former release of 228K. This suggests less need to lower interest rates and stimulate growth.

As market participants are losing confidence in the Fed easing interest rates from May, the broader appeal of the US Dollar is improving. The US Dollar is negatively correlated to Gold price and tends to attract higher foreign outflows if the Fed maintains a hawkish stance (higher interest rates) for longer.

Gold price is struck inside Thursday’s range of $2,020-2,039 in Friday’s London session. An inability to deliver a decisive move indicates a sharp contraction in volatility.

The Gold price has been forming a Symmetrical Triangle chart pattern since December on a daily time frame, demonstrating indecisiveness among market participants. The downward and upward-sloping trendline borders of the aforementioned pattern are plotted from December 28 high at $2,088 and December 13 low at $1,973, respectively. The 50-day EMA at $2,023 continues to cushion the Gold price bulls.

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