Gold Prices Inch Up as Dollar Weakens Ahead of Inflation Data

26 Mar 2024 , 12:00 PM

Gold prices rose slightly on Tuesday, supported by a weaker dollar ahead of anticipated U.S. inflation data later in the week, potentially influencing the timing of the Federal Reserve’s interest rate decisions.

Spot gold increased by 0.1% to $2,172.82 per ounce, as of 0122 GMT. U.S. gold futures dipped 0.1% to $2,173.70 per ounce. The dollar index fell by 0.3% against its counterparts, making gold more affordable for holders of other currencies.

Last week, gold prices reached a record high after Fed policymakers hinted at continued interest rate cuts despite recent high inflation readings.

Spot silver remained unchanged at $24.68 per ounce, while platinum increased by 0.4% to $906.10 and palladium rose by 0.4% to $1,009.

Chicago Fed Bank President Austan Goolsbee revealed on Monday that during the Fed’s policy meeting last week, he projected three rate cuts for the current year. This stance underscores the central bank’s determination to navigate the economic landscape by implementing accommodative monetary policies. However, Fed Governor Lisa Cook advised caution, emphasizing the need for meticulous consideration as the Fed deliberates the timing of interest rate adjustments.

Market participants eagerly anticipate the release of the U.S. core Personal Consumption Expenditure (PCE) price index data scheduled for Friday. Projections suggest a 0.3% increase in the PCE price index for February, maintaining the annual pace at 2.8%. These figures will provide crucial insights into inflationary trends and could potentially influence the Fed’s monetary policy decisions in the near term.

Traders are currently pricing in a 70% probability of the Fed initiating rate cuts in June, as indicated by the CME Group’s FedWatch Tool. The anticipation of lower interest rates diminishes the opportunity cost associated with holding gold, thereby driving demand for the precious metal.

The market’s focus is currently on the impending release of the U.S. Core Personal Consumption Expenditure Price Index data (PCE), scheduled for Friday. However, the market response to this data may be delayed until next week due to the Good Friday holiday.

Analysts anticipate that gold prices will likely remain rangebound as long as they hold above the support level at ₹65,440/65,150.

In recent trading, silver experienced a decline of 0.4%, reaching $24.57, while platinum saw a modest increase of 0.2%, reaching $904.62. Meanwhile, palladium dropped by 0.2%, reaching $1,002.41.

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