Gold prices eased lower on Thursday, as the market reacted to the latest US data which cast doubts over the prospect of imminent interest rate cuts.
For much of the day, prices moved a few cents on either side of $2,030 an ounce, little changed from the range seen over the previous two days. However, prices fell as low as $2,014 an ounce in the late afternoon session.
US inflation rates released Thursday showed an increase to 3.4% in December, on a year-on-year basis, compared with 3.1% in November, dampening the odds that the US Fed would start cutting interest rates in the next couple of months. Recent data from interest rate traders had implied that a small majority of players expect a 25-basis-point cut in March, but the latest economic data create a challenge for that scenario, and there is enough uncertainty to keep the market guessing for the time being.
A longer period of higher interest rates would be expected to weigh on gold prices as a non-yield-bearing asset, while an earlier start to rate cuts would likely provide a tailwind for the yellow metal.
The US dollar also rose in value against other major currencies on Thursday, reacting to the US data, and providing a bearish factor for dollar-denominated assets like gold.
Looking ahead, Friday will see the release of monthly US Producer Prices figures, which are set to provide the latest clues on the state of inflation in the US.
Frank’s experience covering the commodities markets spans 22 years, with a particular specialism in metals, carbon and energy markets. He has worked as a senior editor for S&P Global Commodity Insights (formerly Platts) and before this, at ICIS-LOR, a part of Reed Business Information (Reed Elsevier), where he covered the petrochemicals markets from 2003 to 2005.
This publication is for informational purposes only and is not intended to be a solicitation, offering or recommendation of any security, commodity, derivative, investment management service or advisory service and is not commodity trading advice. This publication does not intend to provide investment, tax or legal advice on either a general or specific basis.
Read our Editorial Guidelines here.
