Gold prices experienced a second consecutive day of buyer interest on Friday, hovering just below the previous day’s high as the European trading session began. This movement was influenced by the release of the US GDP report on Thursday, which indicated a slowdown in growth at the start of 2024 alongside an uptick in inflation levels, providing some support to the precious metal.
Despite this, the upward movement in gold lacked strong bullish conviction due to renewed US Dollar (USD) buying, fueled by expectations of a hawkish stance from the Federal Reserve (Fed). Investors are increasingly convinced that the Fed will delay interest rate cuts given persistent inflationary pressures, which have led to elevated US Treasury bond yields and increased demand for the USD.
Furthermore, the overall positive sentiment in equity markets has served to temper gains in safe-haven assets like gold. Market participants are now awaiting the release of the US Personal Consumption Expenditures (PCE) Price Index for insights into the Fed’s future rate-cutting trajectory. This data will likely shape the next directional move for gold, a non-yielding asset, as traders assess the implications of inflation trends on Fed monetary policy decisions.
