The relentless surge in gold prices took a brief hiatus on Monday as investors awaited crucial US inflation data for insights into the Federal Reserve’s future monetary policy decisions.
Spot gold maintained stability at $2,178.44 per ounce, while U.S. gold futures remained unchanged at $2,185.30 as of 0339 GMT. This pause comes after gold achieved a record peak of $2,194.99 for the fourth consecutive day on Friday, buoyed by indications of a cooling U.S. labor market.
Matt Simpson, a senior analyst at City Index, noted the growing demand for gold, with speculators significantly increasing their net long positions in the market. This surge in demand has made gold an unfavorable market for short-selling, especially amidst expectations of potential Fed rate cuts.
Recent data revealed that COMEX gold speculators escalated their net long positions by 63,018 contracts to 131,060 in the week ending March 5. Simpson emphasized that gold prices are likely to consolidate at elevated levels as investors await the release of February’s consumer price inflation (CPI) data on Tuesday. This data holds significant weight in shaping gold prices for the week, particularly as the Federal Reserve is currently in a blackout period.
A subdued CPI reading could bolster the case for an early rate cut, thereby supporting gold prices. Federal Reserve Chair Jerome Powell’s recent Congressional testimony has hinted at a greater inclination towards interest rate cuts in the coming months, further influencing market sentiment.
Currently, traders are pricing in three to four quarter-point rate cuts in the US, with a 75% likelihood of the first cut occurring in June, according to LSEG’s interest rate probability app. Lower interest rates enhance the attractiveness of non-yielding assets like gold.
Meanwhile, spot silver experienced a slight decline of 0.3% to $24.25, while platinum dipped 0.1% to $911.84 per ounce. In contrast, palladium witnessed a modest increase of 0.3% to $1,023.15 per ounce.
As markets eagerly await the release of US inflation data, the trajectory of gold prices remains contingent upon the outcome, with investors closely monitoring for signals of potential monetary policy shifts by the Federal Reserve.