In Thursday’s North American session, gold prices experienced a notable increase of more than 0.50% following the release of the Core Personal Consumption Expenditure (PCE) Price Index, the Federal Reserve’s preferred gauge of inflation. The data, which aligned with estimates, confirmed the ongoing disinflationary trend, leading to a decline in US Treasury bond yields. Given the inverse correlation between bond yields and precious metal prices, the yellow metal saw a substantial surge, and the XAU/USD pair traded at $2,046.
The highly anticipated Core PCE report, released by the US Bureau of Economic Analysis, unveiled annual figures that met expectations. The data indicated a deceleration in inflation from December’s 2.9% to 2.8% year-on-year in January. Similarly, headline inflation exhibited a significant drop from 2.6% to 2.4% year-on-year in January, aligning with consensus forecasts. This data prompted a bullish movement in gold prices, fueled by the corresponding decline in US Treasury bond yields, as market participants speculated on the possibility of earlier-than-expected rate cuts.
In the wake of the data release, the CME FedWatch Tool, measuring interest rate probabilities, indicated a shift in trader expectations. The likelihood of the first rate cut, initially anticipated in June, rose from 39% the previous day to 50.9% at the time of writing.
Additionally, other key economic data released during the day included Initial Jobless Claims, Pending Home Sales, and the Chicago Purchasing Managers Index (PMI) for February.
