Gold prices were showing little direction on Monday and Tuesday, with the market treading water ahead of further data announcements this week.
Gold was changing hands at around $2,025 an ounce late Tuesday afternoon, compared with $2,021 an ounce late Monday. Prices did manage a brief spike to $2,038 on Tuesday but there was little momentum behind the move, leaving prices to fall back later in the day.
Looking ahead this week, Thursday will see a flurry of data announcements. The ECB is set to make an interest rate decision followed by a press conference. There is little chance of any surprises here as the markets widely expect the bank to maintain current rates at 4.5% in an ongoing effort to keep inflation under control. Nevertheless, there may be further clues about the outlook for EU monetary policy going forward.
Thursday will also see the release of US Durable Goods Orders for December and the GDP growth rate for Q4, both of which may provide more signals on the health of the US economy.
Recent strength in the US economy has provided the Fed with more leeway to maintain higher rates for longer, forcing traders to dial back their expectations of cuts as soon as March.
As of Tuesday, data from interest rate traders indicates only a 40% probability that the Fed will cut rates by 25 basis points at its March 20 meeting, according to the CME FedWatch Tool. Higher interest rates are bearish for non-yield-bearing assets such as gold and silver, as they raise the opportunity cost of storing wealth in such investments.
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.
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