Despite recording gains in the last sessions of last week, gold suffered losses for the second week in a row, after hot inflation data calmed expectations of an early cut in interest rates by the Federal Reserve (the US central bank).
Gold futures prices reversed their upward trend at Friday’s settlement, by 0.5 percent, or $10.6, bringing the ounce to $2,025.5, after falling to $2,006.6, reducing the yellow metal’s losses since the beginning of the week at 0.7 percent.
Meanwhile, the value of the dollar index – which measures the performance of the US currency against a basket of six major currencies – stabilized at 104.27 points, achieving a slight weekly increase of about 0.16 percent, and since the beginning of the year by about 3 percent.
Data showed that US producer prices rose more than expected in January. Another report Tuesday showed that consumer prices in the United States rose more than expected last month.
Although gold is considered a hedge against inflation, high interest rates reduce the attractiveness of non-yielding bullion.
Since the Fed is unlikely to cut interest rates in March, gold will likely struggle to rally, said Everett Millman, senior market analyst at Gainesville Queens.
He added that economic growth in the United States is fairly strong, indicating higher inflation, which represents a headwind for gold, expecting gold prices to decline further to the $1,960 level.
Investors retreated from their expectations of a cut in US interest rates from March to June. Markets are currently pricing in a 73 percent chance of a cut in June, according to CME’s Federal Reserve monitoring tool.
Atlanta Fed President Rafael Bostic said Thursday that more time is needed to evaluate the possibility of an interest rate cut, and also noted that he expected two rate cuts in 2024.
Despite the global decline in gold over the past week, physical gold prices in India have seen a notable rise. Gold premiums in India reached their highest levels in more than four months as demand improved, as jewelers stockpiled inventory in preparation for the wedding season.
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