Gold prices fluctuate in response to U.S. inflation data

Shafaq News/ On Friday, gold prices appeared to be breaking a three-week trend of gains as unexpected U.S. inflation data led investors to reassess the Federal Reserve's potential rate cut timeline for the year.

Although spot gold saw a slight increase of 0.1% to $2,163.92 per ounce early in the day, it was projected to experience a weekly decline exceeding 0.6%, marking its first weekly drop since mid-February. Concurrently, U.S. gold futures remained stable at $2,168.00.

The rise in U.S. producer prices surpassed forecasts in February, and a recent consumer inflation report indicated persistent inflationary pressures. This persistent inflation is likely to compel the Federal Reserve to maintain higher interest rates, which tends to dampen the allure of non-interest-bearing assets like gold, while bolstering the attractiveness of bonds and strengthening the dollar.

This week, 10-year Treasury yields have surged by nearly 20 basis points to 4.2824%, and the dollar index has advanced over 0.7%, setting the stage for its most significant weekly gain since the beginning of the year.

The strengthening U.S. dollar renders gold more costly for holders of other currencies. Meanwhile, other economic indicators revealed a recovery in U.S. retail sales last month, albeit falling short of analysts' predictions, and a decrease in unemployment claims.

Market sentiment has shifted, with the likelihood of a rate cut by the U.S. Fed in June now standing at 61%, a decrease from last Friday's estimate of about 75%. Looking ahead to 2024, the market anticipates roughly three rate cuts, a slight reduction from last week's expectation of three to four cuts.

In the precious metals market, spot platinum declined by 0.4% to $927.35 per ounce, palladium fell by 0.2% to $1,066.86, and silver rose by 0.6% to $24.97. Despite the fluctuations, all three metals were on track to register a weekly gain.

Source: Reuters