Gold prices held steady in Asian trading on Friday, closing in on the key threshold of $2,050 per ounce, buoyed by data indicating a potential easing of inflation that could lead to Federal Reserve rate cuts. The current spot prices for the yellow metal are on the verge of breaking out of the $2,000 to $2,050 per ounce trading range that has characterized most of the trading activity in 2024.
Despite the positive momentum for gold, the strength of the US dollar curtailed further gains, as the greenback maintained its resilience in overnight trading and carried that strength into the Asian session. Spot gold stabilized at $2,043.64 per ounce, while April gold futures experienced a marginal 0.1% decline to $2,051.95 per ounce by 00:24 ET (05:24 GMT). Both spot and futures instruments saw gains ranging from 0.4% to 0.6% on Thursday, benefiting from month-end buying following a relatively subdued performance in February.
In addition to gold, other precious metals also advanced during Friday’s trading. Platinum futures rose by 0.3% to $885.45 per ounce, while silver futures increased by 0.3% to $22.953 per ounce.
The recent data on the Personal Consumption Expenditure (PCE) price index, the Federal Reserve’s preferred inflation metric, indicated a decline in January as expected. This development has fueled optimism that inflation might decrease in the coming months, potentially prompting the Federal Reserve to implement rate cuts in June. However, the CME FedWatch tool showed only a marginal increase in traders’ expectations for a June rate cut, while bets on a status quo remained steady.
Several Fed officials cautioned that persistent inflationary pressures might dissuade the central bank from rushing into policy loosening, signaling that any future inflation upticks could diminish the likelihood of a June rate cut.
Looking ahead, the trajectory of precious metal prices in the coming months is likely to hinge on the inflation prints for February and March. Over the past two years, these prices have closely followed US rate expectations, and any divergence may impact the metals market. Rising rates in recent years have negatively affected gold, as the opportunity cost of investing in the yellow metal increased, a trend that also impacted other metals.
