Gold prices are poised to secure their second consecutive weekly gain on Friday, buoyed by mounting expectations that the Federal Reserve may cut interest rates later this year following recent U.S. inflation data.
As of 0236 GMT, spot gold inched up 0.1% to $2,379.14 per ounce, marking a 0.7% increase so far this week. U.S. gold futures remained flat at $2,383.20 per ounce. The dollar index has fallen 0.6% against its rivals for the week, making gold more affordable for holders of other currencies.
“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,” stated Yeap Jun Rong, a market strategist at IG.
Gold has recovered nearly 5% over the past two weeks. However, with clarity on the U.S. consumer price index data and the upcoming weekend, some slight profit-taking is expected.
The week’s data showing signs of cooling inflation provided the Federal Reserve with positive news, though policymakers have not yet indicated a shift in their stance regarding the timing of rate cuts, which investors believe will commence this year.
While bullion is traditionally viewed as a hedge against inflation, higher interest rates elevate the opportunity cost of holding non-yielding gold. “Gold prices may correct lower as markets look to re-establish the historical relationship between gold and the U.S. dollar. Uncertainty will likely persist in gold markets in the coming months,” the Commonwealth Bank of Australia noted.
In other precious metals, spot silver fell 0.2% to $29.53 per ounce after reaching an over three-year high in the previous session. Palladium dropped 1.1% to $982.77 per ounce, and platinum rose 0.3% to $1,060.15 per ounce, having hit its highest level since May 2023 in the previous session, with a weekly gain of about 7%.
As the market continues to react to economic indicators and Fed policy signals, gold’s performance underscores the dynamic interplay between inflation expectations, interest rates, and geopolitical developments, with investors closely monitoring the evolving landscape.
