The price of gold is approaching its all-time highs, but what’s next?

The price of gold (XAU/USD) declined during Wednesday’s trading and is currently trading at $2126.80, after failing to reclaim its all-time high of around $2145.

The price is expected to remain sideways and consolidated as investors await Federal Reserve Chairman Jerome Powell’s testimony before Congress, starting today and continuing until tomorrow.

I believe Jerome Powell will support keeping interest rates in the range of 5.25%-5.50% until he sees evidence that inflation will return to the desired rate of 2%.

This will increase pressure on non-yielding assets, such as gold, especially as the Federal Reserve is inclined to maintain a hawkish stance on interest rates for an extended period.

From my perspective, the market will also focus on the ADP employment change data in the United States and JOLTS job openings data for February and January, respectively. These will provide more insights into the labor market on Friday, potentially affecting price volatility amid cautious sentiments about inflation, the job market, and interest rates.

While market participants want to know the timeline for monetary easing and interest rate cuts this year, Powell is likely to be hesitant to provide detailed or clear information on interest rate cuts. Federal Reserve officials are unlikely to prioritize policy easing before gaining confidence that inflation will drop to the 2% target. The Fed wants to see a clear decline in inflation for several months as a decisive signal before starting interest rate cuts.

Therefore, I anticipate that Powell’s testimony will strongly influence market expectations for interest rate cuts at the June policy meeting, especially as the chances of a 25-basis points interest rate cut in June increased from 53% to 58% on Tuesday.

It is crucial to consider that Friday will be a highly significant day when the ADP Employment Report for February and JOLTS job openings for January will be released. Private sector employers in the United States are expected to add 150,000 jobs compared to the previous reading of 107,000, with 8.9 million new job opportunities announced in January, down from 9.027 million in December. This data contradicts the current strength in gold prices.

Meanwhile, the U.S. Dollar Index (DXY) continues its fourth consecutive day of losses on Wednesday, trading near a weekly low at around 103.60. This comes after weak manufacturing and services purchasing managers’ index (PMI) data for February indicated an economic growth slowdown. However, there may be surprises and a return to an uptrend with strong data on Friday, demonstrating labor market resilience.