The price of gold (XAU/USD) demonstrated resilience during the early Asian session on Friday, bouncing back from the weekly low of $2,013 to $2,030. However, the precious metal faces potential limitations on the upside, primarily stemming from expectations that the Federal Reserve (Fed) may not initiate interest rate cuts as early as previously anticipated. This sentiment could exert selling pressure on gold prices in the near term.
The US Dollar Index (DXY), which measures the USD against a basket of six major world currencies, strengthened, reaching 102.30. Concurrently, US Treasury yields edged higher, with the 10-year yield standing at 3.97%.
Thursday’s US inflation report surpassed expectations, revealing a Consumer Price Index (CPI) for December that rose to 3.4% year-on-year, exceeding the previous reading of 3.1%. The monthly headline CPI also outperformed, growing by 0.3% compared to the consensus of 0.2%. The Core CPI, excluding volatile food and energy prices, climbed to 3.9% year-on-year, slightly surpassing the estimated 3.8%.
The upbeat US data prompted some buyers for the US Dollar, as futures traders speculated that the Fed might delay its first interest rate cut. Chicago Fed President Austan Goolsbee’s remarks suggested the potential for interest rate cuts in 2024 if the trend of falling inflation continued. However, New York Fed President John Williams maintained a more cautious outlook, indicating that the “restrictive” monetary policy is likely to remain in place for some time.
Investors are closely monitoring Chinese economic data, with the nation’s Consumer Price Index (CPI) expected to decline by 0.4% year-on-year in December. Simultaneously, the Producer Price Index (PPI) is forecasted to fall to 2.6% year-on-year from the previous reading of 3.0%. Weaker-than-expected data from China, one of the world’s largest gold consumers, could weigh on the yellow metal. Additionally, the release of the US Producer Price Index (PPI) later on Friday is anticipated to provide further insights into the economic landscape.
As gold navigates through a complex market influenced by economic indicators and central bank signals, investors remain attuned to developments that could shape the precious metal’s trajectory in the coming sessions.
