On Monday, gold continued to fall, trading below $1,940 after Federal Reserve (Fed) Chairman Jerome Powell reiterated his hawkish stance on interest rates.
Powell stated that he is not convinced that current interest rates are high enough to keep inflation in check.
The Fed chief also believes that the failure to bring inflation under control will be the central bank's biggest mistake, so the main financial regulator of the United States will not hesitate to raise interest rates if necessary.
It is worth noting that the main reason why the Fed has not yet raised interest rates is the high yield on long-term U.S. bonds, which now exceeds 4.6%.
Nevertheless, the U.S. Dollar Index (DXY) remains below 106.00 as investors still expect the Fed to begin its rate-cutting cycle in mid-2024.
Economists at Morgan Stanley said in their forecast for future Fed policy that the U.S. central bank will start cutting rates in June 2024. Rates are expected to be cut by 25 basis points to 2.375% by the end of 2025.
Gold's losses remain limited due to a possible escalation in the military standoff between Israel and Palestine. Israeli Prime Minister Benjamin Netanyahu has said that there will be no ceasefire until Hamas releases all hostages.
Currently, the XAU/USD is trading down 0.16% at $1,937.37.
The bullish trend is expected to continue as long as gold stays in the $1,930-$2,000 range. However, a drop below $1,930 could increase selling pressure and lead to a drop to $1,900 and below.
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