Safe Haven Slump: Gold at Lowest Point in Two Months

15 Feb 2024 , 10:11 AM

As investors evaluated U.S. Federal Reserve officials’ ambivalent comments regarding January’s hotter-than-expected inflation figures, which led to a retreat in expectations of earlier and more significant interest rate decreases, gold prices maintained close to a two-month low on Thursday.

Spot gold remained unchanged at $1,992.77 per ounce (Oz), having fallen to its lowest level since Wednesday, December 13.

At $2,004.60/Oz, U.S. gold futures were likewise unchanged.

President of the Chicago Fed Austan Goolsbee stated on Wednesday that the central bank should be cautious about delaying rate cuts for an extended period of time and that the Fed’s path back to its 2% inflation target rate would still be on track even if price increases run a little hotter than anticipated over the coming months.

Goolsbee’s comments were made in response to Tuesday’s unexpectedly high increase in U.S. inflation, which revealed that the consumer price index (CPI) increased 3.1% annually, exceeding estimates of a 2.9% increase.

Following the release of the CPI figures, gold fell 1.4%, marking the largest daily loss since December 4.

Vice Chair of the Fed for Supervision The Fed, according to Michael Barr, is still optimistic, but the January CPI data indicates that the road back to 2% inflation in the US ‘may be a bumpy one.’

As of right now, traders are pricing in 97 basis points (bps) of rate cuts this year, up from 85 bps early on Wednesday. The first of these cuts will probably occur in June. In December, the Fed produced a ‘dot plot’ that indicated three quarter-point rate decreases in 2024.

The focus is now on the producer price index (PPI) data that is due on Friday and the U.S. retail sales data that is due at 1330 GMT. This week, there will be at least three Fed speakers.

Spot silver declined 0.1% to $22.35, spot platinum fell 0.3% to $886.46/Oz, while spot palladium slid 0.5% to $929.72.

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