Daily digest market movers: Gold, bond yields drop on weak safe-haven appeal

Gold price falls slightly to $2,180 as safe-haven demand eases on improved market sentiment. The precious metal trades broadly sideways after refreshing all-time highs slightly below the round-level resistance of $2,200. The yellow metal is expected to witness a decisive break after the release of the United States consumer price inflation data, which will provide more guidance on the interest rate outlook.

Monthly headline CPI is expected to increase 0.4% from 0.3% in January. The monthly core CPI, which excludes volatile food and energy prices, is forecasted to have grown at a slower pace of 0.3% against the prior reading of 0.4%. Annual headline inflation is anticipated to have grown at a steady pace of 3.1%, while the core CPI is forecast to soften to 3.7% from 3.9% in the same period.

Hotter-than-expected inflation data would allow Federal Reserve policymakers to avoid rushing for rate cuts. This would indicate that a victory over inflation is not in sight,  deepening the uncertainty over the interest rate cuts in the first half of this year as policymakers could lean towards keeping interest rates higher.

Last week, Fed Chair Jerome Powell said in his Congressional testimony that it would be inappropriate to start lowering interest rates before gaining conviction that inflation will sustainably return to the 2% target. However, Powell also said that the central bank is not far from gaining that conviction.

Currently, market expectations for the Fed reducing interest rates in the June meeting remain firm as labor market conditions are not overly tight. The US Nonfarm Payrolls (NFP) report for February showed slower wage growth and a higher Unemployment Rate, though hiring remains robust. The CME FedWatch tool shows that there is a 72% chance that the Fed will cut interest rates in June.