XAU/USD holds positive ground above $2,020 ahead of US CPI data

• Gold price gains ground around $2,026 on the softer USD. 
• Fed’s Williams said it is premature to call for rate cuts
• Market players will closely monitor the US Consumer Price Index (CPI), due on Thursday.

Gold price (XAU/USD) drifted higher during the early Asian trading hours on Thursday. The softer US Dollar (USD) lends some support to the yellow metal ahead of the key US CPI report on Thursday. At press time, the gold price is trading at $2,026, gaining 0.15% on the day. 

Meanwhile, the US Dollar Index (DXY), a measure of the value of the USD against a weighted basket of currencies used by US trade partners, drops to 102.35. The US Treasury yields edge lower, with the 10-year yield standing at 4.03%.

Federal Reserve (Fed) Bank of New York President John Williams said on Wednesday that it is premature to call for rate cuts as the Fed still faces challenges in bringing inflation to its target level of 2%. Williams further stated that the Fed will need to maintain a restrictive policy posture for some time to fully achieve its goals, and monetary policy decisions will be made at each meeting, taking into account the incoming data, the evolving outlook, and the balance of risks.

Fed maintained the interest rate unchanged at its December meeting and penciled in three quarter-percentage-point rate cuts by the end of 2024. Minutes from that meeting released last week did not indicate any discussion about a timetable for the rate cuts. However, traders will keep an eye on the US inflation report on Thursday for fresh impetus. Economists estimate inflation to rise in December, casting doubt on the market’s keen expectation that the Fed would cut interest rates this year.

Moving on, the US Consumer Price Index (CPI) is due later on Thursday. The headline inflation is estimated to rise 0.2% MoM, and the core CPI is expected to rise 0.3% MoM in December. Also, the weekly Initial Jobless Claims will be released on the same day. On Friday, attention will shift to the Chinese CPI, Producer Price Index (PPI), and Trade Balance data.