Gold prices (XAU/USD) maintained a stable stance during the early Asian session on Monday, with the yellow metal receiving support from a combination of softer US Producer Price Index (PPI) data and escalating geopolitical tensions in the Middle East. At the time of reporting, the gold price is trading at $2,045, experiencing a marginal loss of 0.01% for the day.
The latest US PPI report for December indicated a 1.0% year-on-year increase, falling short of market expectations of 1.3%. The annual core PPI, excluding volatile food and energy prices, rose by 1.8%, below the market consensus of 1.9%. These figures suggest deflationary signs, contributing to increased confidence in the likelihood of the Federal Reserve (Fed) cutting interest rates in March. Investors are now pricing in a 74.2% probability of a rate cut in March, up from 70% the previous week, according to the CME FedWatch Tool. The anticipation of a rate cut is placing downward pressure on the US Dollar and providing a tailwind for gold prices.
In addition to the impact of softer economic data, gold’s gains were fueled by safe-haven buying amid rising geopolitical tensions. Recent strikes by the United States and the United Kingdom against Houthi targets in Yemen, in response to the Iran-backed militant group’s attacks on commercial shipping in the Red Sea, have heightened global uncertainties.
With the Martin L. King’s Birthday bank holiday in the United States leading to the absence of top-tier economic data, market focus is expected to remain on risk sentiment as a key driver of gold price action. Later in the week, attention will turn to the US NY Empire State Manufacturing Index on Tuesday, Retail Sales on Wednesday, and the Michigan Consumer Sentiment Index report on Friday. Traders will closely monitor these releases for potential market-moving insights.
