Gold Glows as Dollar Stumbles

9 Jan 2024 , 09:34 AM

Following an official U.S. report citing consumers expect lower inflation, which solidified bets for interest rate cuts from the Federal Reserve, gold prices edged higher on Tuesday, helped by a decline in the dollar.

Spot gold was up 0.2% at $2,032.39 per ounce, after touching a three-week low on Monday. U.S. gold futures also increased 0.2% to $2,038.30 per ounce.

A New York Federal Reserve survey on Monday indicated consumers expect reduced inflation as well as weaker income and expenditure over the next several years.

Reversing her long-standing hawkish stance, Fed Governor Michelle Bowman stated that she now views US monetary policy as ‘sufficiently restrictive’ and indicated that she might be open to supporting future interest rate reductions should inflation starts to decline.

Holding non-yielding bullion has a lower opportunity cost when interest rates are lower.

Because of the 0.1% decline in the dollar index, bullion became more appealing to holders of foreign currencies.

A stronger-than-expected jobs report earlier this month and the most recent Fed minutes, which highlighted ambiguity surrounding the timing of rate decreases, dampened some expectations for an early U.S. interest rate cut.

According to the CME FedWatch tool, market participants are pricing in a roughly 62% possibility of a rate drop by the US central bank in March, down from a nearly 90% probability observed before the New Year.

Investors will now be waiting for the U.S. consumer price inflation report on Thursday to get more insight into the scope and magnitude of the Fed’s rate cut.

Tuesday’s gains across Asia’s market indices followed Wall Street’s tech-led rally.

In the meantime, core inflation in the capital of Japan decreased in December for the second consecutive month, relieving some of the pressure on the central bank to quickly end its extremely loose monetary policy.

Spot silver increased by 0.1% to $23.11 an ounce, while palladium and platinum saw increases of 0.5% and 0.5%, respectively, to $950.08 and $1,002.76.

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