In Monday’s European session, the price of gold (XAU/USD) experienced robust demand, supported by various favorable factors. Investors are increasingly confident in the likelihood of the Federal Reserve (Fed) implementing interest rate cuts starting in March. This sentiment gained traction following the release of the unexpectedly soft Producer Price Index (PPI) figures for December.
Market participants anticipate that the decline in prices for goods and services at the production level will contribute to further alleviating inflationary pressures. This trend suggests a progressive reduction in inflation, moving closer to the Fed’s 2% target.
In addition to economic factors, the allure of gold has also strengthened due to escalating geopolitical tensions in the Middle East. The US and UK military initiated airstrikes against the Houthis in response to their attacks on commercial oil shipments in the Red Sea. This development has heightened concerns about an intensifying conflict in Gaza, with the potential involvement of Iran in the ongoing Israel-Hamas war.
