In an early Asian session on Monday, the price of gold (XAU/USD) continued its upward trajectory, reaching nearly $2,200 after establishing fresh all-time highs above $2,180. The yellow metal’s rally is bolstered by the anticipation that the Federal Reserve (Fed) will implement interest rate cuts this year, coupled with ongoing geopolitical tensions that fuel safe-haven demand.
Fed Chair Jerome Powell, during last week’s semiannual testimony on Capitol Hill, expressed confidence in the health of the US economy. Powell suggested that policymakers are nearing the threshold of confidence needed to initiate rate cuts, emphasizing a downward trajectory in inflation. Futures markets are currently pricing in a 70% likelihood of the Fed beginning rate cuts by mid-June, with expectations of a full percentage point reduction by the end of the year, according to the CME FedWatch Tools.
The latest data from the Labor Department, released on Friday, indicated a robust addition of 275,000 jobs in February, surpassing the estimated 200,000. However, the Unemployment Rate rose to 3.9% in February from 3.7% in January, marking the highest level in two years. This mixed economic report has heightened speculation about the possibility of Fed interest rate cuts by June.
Over the weekend, China’s inflation report signaled a return to normal consumption levels, positively impacting the gold price. China, as the world’s leading gold consumer, showcased signs of rising domestic demand in its February economic data. The Chinese Consumer Price Index (CPI) rose by 0.7% YoY in February, surpassing expectations and reversing the 0.8% decline observed in January. Meanwhile, the Producer Price Index (PPI) in China declined by 2.7% YoY in February, indicating a steeper fall than the anticipated and prior reading of a 2.5% decline.
Looking ahead, gold traders are closely monitoring upcoming economic indicators, with a particular focus on the US Consumer Price Index (CPI) and Retail Sales data for February. The CPI inflation figure is projected to exhibit a 0.4% MoM increase and a 3.1% YoY rise in February. Simultaneously, Retail Sales are anticipated to climb by 0.7% MoM for the same period, providing fresh impetus for gold market dynamics later this week.
