Gold prices fell back on Thursday after US data showed a stronger-than-expected economy in February, and with higher inflation, slashing the odds of an interest rate cut in the near-term.
Prices fell as low as $2,154 an ounce by mid-afternoon, compared with around $2,175 an ounce in late trades on Wednesday.
US producer prices for February released Thursday came in above market expectations, and marked the largest increase since August 2023. The figures suggested inflation may be more ‘sticky’ than previously thought, indicating that interest rates may have to stay at current levels for longer as the US Fed works to tame rising prices.
A higher inflation scenario boosts the argument for a more hawkish stance by the central bank, which is a negative for non-yielding assets like gold.
Adding to the bearish picture, US initial and continuing jobless claims figures were released Thursday showing a lower-than-expected number of people claiming unemployment benefits in the week ending March 8. These figures indicate a stronger economy, and hence less need for a more accommodative monetary policy by the Fed.
The latest economic figures helped to push the US dollar higher against other major currencies on Thursday, as well as driving yields on the US 10-year Treasury note higher for a fourth day, both of which heaped more downward pressure on dollar-denominated gold prices.
Thursday’s slight pullback for gold comes in the context of massive gains seen in the first half of March, which saw the yellow metal hit all-time highs of $2,195 an ounce.
Looking ahead, Friday will see the release of US industrial production figures for February as well as the Michigan consumer sentiment preliminary numbers for March, providing a further update on economic conditions.
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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