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Gold opened higher and could remain volatile as traders await more clarity on the Federal Reserve’s policy direction.
The focus is on the outcome of the FOMC meeting on Wednesday and any clues from Jerome Powell.
Markets could also remain attentive to important US economic data, including the Non-Farm Payrolls (NFP) report on Friday, which could trigger further volatility for the dollar and impact gold prices in the near term.
Market bets on an imminent start of the Federal Reserve’s policy easing cycle in September have kept US Treasury bond yields under pressure, which could be favorable for gold prices.
Interest rate cuts could support gold over the medium to long term as traders expect several interest rate cuts this year and the next as the Federal Reserve adjusts its policy. However, gold could remain exposed to changes in demand. In Q2, demand for jewelry fell, which could weigh on gold prices in the near term, but demand from central banks remained resilient and could limit its downside.
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