Gold enthusiasts have been on quite the rollercoaster ride this week as the precious metal faced its second consecutive weekly decline. The culprit? Sizzling inflation data have dampened expectations surrounding rate cuts by the Federal Reserve.
Despite a modest uptick on Friday, spot gold has struggled, losing 0.6% weekly, hovering around $2,012.86 per ounce. Similarly, U.S. gold futures settled slightly higher at $2024.1, but the outlook remains uncertain.
The strengthening dollar index and the upward march of the benchmark 10-year Treasury yield have made gold less enticing to investors. With U.S. producer and consumer prices surpassing expectations in recent reports, the prospect of higher interest rates looms large, casting a shadow over non-yielding bullion’s appeal.
Everett Millman, chief market analyst at Gainesville Coins, painted a cautious picture, suggesting that without the prospect of a March rate cut, gold’s ascent above $2,000 may be stunted. He even forecasted a further dip to the $1,960s level, citing robust U.S. economic growth and inflationary pressures.
Traders are revising their expectations, pushing back anticipated rate cuts from March to June. The CME Fed Watch Tool currently pegs the likelihood of a June cut at 73%, reflecting evolving sentiments in the market. Federal Reserve Bank of Atlanta President Raphael Bostic echoed this sentiment, emphasizing the need for additional time to assess the situation.
On the flip side, there’s a glimmer of hope in India’s gold market, where premiums soared to four-month highs as demand surged ahead of the wedding season. This physical demand offers a counterbalance to the tumultuous global economic landscape.
As the gold market navigates through these turbulent waters, one thing remains certain: uncertainty. With economic indicators sending mixed signals and central banks grappling with policy decisions, the journey ahead for gold promises to be anything but dull.