Gold prices rise despite uncertainty over U.S. interest rate cuts

Traders await key inflation data amidst shifting expectations
Gold prices rise despite uncertainty over U.S. interest rate cuts
Despite recent adjustments in traders' expectations for U.S. rate cuts, gold has maintained its month-on-month stability

Despite prevailing uncertainty surrounding the pace and magnitude of potential interest rate cuts in the United States, gold prices remained resilient on Thursday, maintaining their ground throughout the month. Traders are closely monitoring upcoming U.S. inflation data, with expectations of its impact on the precious metal’s trajectory.

Spot gold saw a 0.11 percent increase to $2,036.83 per ounce, as of 6:44 GMT. Meanwhile, U.S. gold futures edged 0.11 percent higher to $2,044.95.

In Dubai, too, gold prices saw an increase. Twenty-four-carat gold was priced at AED246.50 per gram, while 22-carat stood at AED228.25 per gram.

Rate cut speculations

Analysts highlighted the significance of the upcoming U.S. personal consumption expenditures (PCE) data, noting that any unexpected upside surprises could pose downside risks for gold prices. Markets now await U.S. PCE inflation data at 13:30 GMT. Despite recent adjustments in traders’ expectations for U.S. rate cuts, gold has maintained its month-on-month stability.

Furthermore, recent data revealed that the U.S. economy grew in the fourth quarter of 2023 amid strong consumer spending. However, it appears to have lost this momentum early this year. Traders are closely watching market dynamics for changes in gold prices amidst uncertain economic indicators.

Traders have adjusted their outlook on U.S. interest rate cuts, reducing expectations from five cuts to three quarter-point cuts for 2024. The anticipation of an initial rate cut in May has also diminished. Projections are now pointing towards a potential cut in June.

Moreover, the U.S. dollar index has strengthened by 0.6 percent, while benchmark 10-year Treasury yields have risen over 30 basis points so far in February. Federal Reserve officials have indicated the possibility of future rate cuts, emphasizing the ongoing pursuit of the 2 percent inflation target. Hence, lower interest rates boost the appeal of holding non-yielding bullion.

Read: Oil prices slip amidst U.S. rate cut concerns, stockpile surge

Other precious metals

With gold prices on the rise, spot silver saw an increase of 0.1 percent to $22.48 per ounce. Meanwhile, platinum saw a 0.4 percent increase to $882.24, and palladium jumped 1 percent to $937.56.

In the face of evolving expectations regarding U.S. interest rate policy and economic indicators, gold prices have demonstrated resilience, maintaining stability amidst shifting market dynamics. Traders remain attentive to forthcoming inflation data, recognizing its potential influence on gold’s trajectory in the near term.

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