Gold Prices Set for Second Consecutive Weekly Gain
Gold prices appeared set for a second consecutive weekly gain on Friday, after recent U.S. inflation data fuelled expectations that the Federal Reserve could cut interest rates this year.
Spot gold was up 0.1% at $2,379.14 per ounce, as of 0236 GMT. Bullion prices have gained 0.7% so far this week.
U.S. gold futures were flat at $2,383.20.
Fed’s Possible Rate Cuts and Impact on Gold Prices
The dollar index was down 0.6% for the week so far, against its rivals, making gold less expensive for other currency holders. This situation, coupled with the possibility of earlier rate cuts by the Federal Reserve, has created an upward bias for gold prices.
IG market strategist Yeap Jun Rong noted, “The upward bias for gold prices may remain, with the recent run in U.S. economic data offering room for the Fed to consider earlier rate cuts in 2024 while geopolitical tensions rock on. The next target for gold bulls will be its record high.”
Additionally, clarity over the U.S. consumer price index data and geopolitical events may prompt profit-taking in the gold market.
Uncertainty and Correction in Gold Prices
Data this week showing signs of cooling inflation offered the U.S. Federal Reserve good news, but policymakers haven’t openly shifted views yet about the timing of rate cuts investors are convinced will start this year.
Bullion is known as an inflation hedge, but higher rates increase the opportunity cost of holding non-yielding gold. Commonwealth Bank of Australia mentioned in a note that gold prices may correct lower as markets look to re-establish the historical relationship between gold and the U.S. dollar. Uncertainty is expected to persist in gold markets in the coming months.
Other Precious Metals Performance
Spot silver fell 0.2% to $29.53 per ounce after hitting an over three-year high in the previous session, and palladium dropped 1.1% to $982.77.
Platinum, on the other hand, rose 0.3% to $1,060.15 after hitting its highest levels since May 12, 2023, in the previous session. The metal has gained about 7% so far for the week.
(Reporting by Sherin Elizabeth Varghese in Bengaluru; Editing by Sherry Jacob-Phillips)
By Sherin Elizabeth Varghese
Insight: The ongoing geopolitical tensions, coupled with the uncertainty surrounding the Fed’s stance on rate cuts and inflation, are likely to continue influencing the movement of gold prices. Investors should keep an eye on these factors to anticipate potential fluctuations in the market.
