The gold market exhibited a directional response to inflation data this week, notably experiencing a sharp decline on Tuesday following hotter-than-expected CPI data for January. The precious metal, initially just below $2,030 per ounce, dipped to $1,991 within an hour and a half after the release. Subsequently, prices traded within a narrow $12 channel on both sides of the $2,000 level until a smaller selloff on Friday morning’s PPI release.
The latest News Weekly Gold Survey unveiled a divergence in sentiment, with retail investors foreseeing potential gains next week, while analysts anticipate a case for precious metal prices to decline. Analysts pointed to bearish signals, citing a bearish breakout of the short-term trend and the long-term uptrend of the US dollar index gaining momentum. Despite this, some experts see opportunities for gold, especially considering ongoing economic and political risks.
Sean Lusk, co-director of commercial hedging at Walsh Trading, observed that geopolitical uncertainties and conflicts contributed to gold’s modest Friday gains. However, he cautioned about the market’s reaction being “limp,” and highlighted potential downside risks amid uncertainties and a seasonal tendency for more sellers than buyers in the second half of February.
Looking ahead, the FOMC meeting minutes on Wednesday is the key event on the economic calendar. Everett Millman, Chief Market Analyst at Gainesville Coins, expects downside risks in gold prices, influenced by the Fed‘s higher-for-longer stance and potential reinforcement of a hawkish tone in the minutes. The recent CPI and PPI data further align with the Fed’s cautious optimism regarding inflation.
Ole Hansen, head of commodity strategy at Saxo Bank, anticipates gold to face short-term struggles but looks forward to observing how Chinese investors, returning from the Lunar New Year holiday, respond to slightly lower prices.
In conclusion, the gold market navigates through volatility driven by economic data, geopolitical tensions, and divergent sentiment. Analysts and investors closely monitor key events and data releases to gauge the trajectory of gold prices in the coming weeks.
