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Gold Prices Recover on Weaker Dollar and Middle East Tensions

12 Jan 2024 , 10:12 AM

Gold prices saw a weeklong decline as traders reevaluated their expectations for early interest rate cuts in the US, but they recovered on Friday due to a weaker dollar and growing attractiveness as a safe haven due to the Middle East war.

Spot gold was up 0.3% at $2,034.06 an ounce. Nevertheless, it has decreased by 0.6% this week. U.S. gold futures increased to $2,038.40, up about 1%.

Buyers holding other currencies found bullion more appealing as a result of the 0.1% decline in the dollar index.

Saudi Arabia demanded moderation in response to the US and UK strikes against locations associated with the Houthi movement in Yemen.

According to data, U.S. consumer prices increased in December more than anticipated; but, when volatile food and energy costs are taken out of the equation, the annual pace of price increases drops to 3.9% from 4%, indicating a continued moderation of underlying pricing pressures.

While Cleveland Fed President Loretta Mester stated it would probably be too early to drop rates in March, Chicago Fed President Austan Goolsbe indicated he is unsure if there has been enough progress for the Fed to begin decreasing rates.

At its meeting on January 30-31, it is anticipated that the Fed would maintain its policy rate. Market analysts predict a 71% possibility of rate decreases starting in March.

According to LSEG’s interest rate probability app, IRPR, traders are all in on 150 basis points (bps) of Fed rate reduction this year. Following that, at 1330 GMT, investors will be examining U.S. producer price data.

Spot silver jumped 0.6% to $22.88 per ounce, platinum climbed 0.3% to $917.48, while palladium gained 0.3% to $991.02.

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