A weaker dollar cushioned further losses in bullion as gold prices fell on Monday as investors braced for US economic data this week that could affect future Federal Reserve policy. Spot gold was down 0.2% at $1,922.58 an ounce. On Friday, it shot up to its highest level since April 2022. Additionally, US gold futures fell 0.2% to $1,924.10.
As the dollar index fell 0.3%, buyers holding other currencies found the dollar price of gold attractive. Ahead of the January 31-February 1 policy meeting, investors will take a close look at the US fourth-quarter GDP growth report on Thursday and US personal spending data on Friday.
Zero yield bars usually work well when interest rates are low. According to Clifford Bennett, chief economist at ACY Securities, the prevailing narrative that the Fed will have to cut or stop rate hikes in the coming months supports gold. Following four consecutive 75 basis point rate hikes, the Fed raised rates by 50bp last month.
Spot silver fell 0.9% to $23.73 an ounce, platinum fell 0.2% to $1,041.50 and palladium rose 0.3% to $1,731.57, among other precious metals. The white metals, which are used more industrially than gold, are under pressure due to growth concerns, according to UBS analyst Giovanni Staunovo.
Gold advances on hope of a less aggressive Fed
The Lunar New Year holiday, recognized in major Asian hubs, generally slowed trade. Gold rose more than $1,930 an ounce on Monday, returning to its nine-month highs amid a general decline in the value of the dollar as recent comments from Federal Reserve officials and deteriorating economic statistics in the US suggested that future monetary tightening could be less pronounced.
Fed Governor Christopher Waller called for a smaller 25 basis point hike at the next meeting, noting that impending rate changes and an anticipated continuation of declining inflation brought policy “pretty close” to be “sufficiently restrictive”.
Investors are now expecting a wealth of data from the US, such as the fourth-quarter GDP growth rate, the PCE price index, durable goods orders, and personal income and spending statistics, which can provide insights. about the rate forecast.
As higher interest rates increase the opportunity cost of holding non-yielding bullion and vice versa, gold is highly sensitive to rate forecasts. The week before, Comex gold prices rose for the fifth week in a row, hitting a new nine-month high of $1,939, as concerns about a recession were fueled by a weaker currency, weak corporate earnings and layoffs.
Since early November, the yellow metal has been on a one-sided rally after falling to a 28-month low of $1,618 on signs the Federal Reserve was becoming less aggressive, leading to a fall in the value of the dollar and the US government returns
The probability of a US recession, a cooling of inflation and the labor market, and a reversal from the Federal Reserve may support gold prices going forward.
