Gold Slumps on Fading Rate Cut Hopes

15 Mar 2024 , 01:03 PM

With shockingly high U.S. inflation figures indicating that the Federal Reserve may decide to minimise the number of rate cuts this year and possibly postpone the first drop until beyond June, gold prices appeared poised for their first weekly decline in four on Friday.

Spot gold was up 0.1% at $2,162.66 an ounce, although it was expected to record its first weekly decline of more than 0.5% since mid-February.

U.S. gold futures stayed at $2,167.00 unchanged.

In February, U.S. producer prices rose more than anticipated due to a spike in the price of commodities like food and petrol, which may fuel concerns that inflation is starting to rise once more.

Increased inflation puts more pressure on the US Federal Reserve to maintain high interest rates, which hurts non-yielding assets like gold.

There was some stickiness in inflation according to a reading on consumer inflation earlier this week.

Additional information revealed that although U.S. retail sales increased last month, they fell short of analyst projections as households struggled with rising borrowing prices and inflation, and fewer people filed for jobless benefits.

Based on LSEG’s rate probability app, traders have reduced the likelihood of a rate decrease at the U.S. Fed’s June meeting to 61% from over 75% last Friday. The market is expecting three rate cuts in 2024, down from three to four last Friday.

So far this week, the dollar index has increased by 0.7%, on track to record its biggest weekly rise since mid-January.

As two border regions have become “active combat zones,” according to a senior Ukrainian intelligence official, investors also kept a watch on developing geopolitical dangers between Russia and Ukraine.

Palladium lost 1% to $1,058.53, spot platinum fell 0.2% to $926.10 per ounce, and silver increased 0.4% to $24.93. Every one of the three metals was about to record a weekly gain.

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