In the early Asian session on Monday, the price of gold (XAU/USD) maintained its position above $2,000. This stability comes as recent US economic data indicates that inflation is more persistent than initially anticipated. Consequently, financial markets are scaling back expectations of the Federal Reserve (Fed) initiating interest rate cuts in June. As of the latest update, the gold price is at $2,014, showing a 0.12% gain for the day.
The Producer Price Index (PPI) for final demand demonstrated a noteworthy increase, rising by 0.3% month-over-month (MoM) in January. This marks a reversal from the 0.1% decline observed in December, representing the most substantial surge since August 2023. On an annual basis, the PPI figure rose by 0.9% year-over-year (YoY), a slight decrease from the previous reading of a 1.0% rise. Meanwhile, US Housing Starts experienced a significant decline of -14.8%, dropping from 1.562 million to 1.331 million, and Building Permits slumped by -1.5%.
Market expectations for a Fed interest rate cut later this year persist, although the likelihood of such a move in June is diminishing. The delay in interest rate cuts may have an impact on the value of gold, considering that higher interest rates can reduce the appeal of non-yielding metals, creating increased competition from higher-yielding investments.
The People’s Bank of China (PBOC) is set to announce its interest rate decision on Tuesday, with no change in policy anticipated. Investors will closely monitor developments related to additional stimulus measures from Chinese authorities in the coming months.
In a separate development, Hezbollah has declared solidarity with its Gaza allies, Hamas, vowing to continue attacks as long as Israel bombards the embattled Palestinian enclave. The escalating geopolitical tensions in the Middle East could potentially contribute to a rise in gold prices, traditionally considered a safe-haven asset.
Looking ahead, market participants are eagerly awaiting the PBoC Interest Rate Decision on Tuesday, and the release of the FOMC Minutes on Wednesday is expected to be a closely watched event. Traders will be analyzing the data for potential trading opportunities surrounding the gold price.
