Gold Remains Held, Market Awaits New Trigger
Gold remains below $5,050 despite growing expectations of a Federal Reserve interest rate hike, while the market is also concentrating on geopolitical tensions. In Monday's Asian session, XAU/USD weakened slightly after gaining more than 2% in the previous session, trading around $5,030 per troy ounce.
Gold remains open to further gains after weaker US inflation data reinforced the case for monetary policy easing in the second half of the year. In theory, the prospect of lower interest rates supports gold because it lowers the opportunity cost of holding assets that offer less yield.
The latest data showed that US CPI rose 2.4% year-on-year in January, slowing from 2.7% in December and below the 2.5% forecast. On a monthly basis, inflation rose 0.2%, down from 0.3% previously and also lower than market expectations. This figure reinforces the view that price pressures are not rising as sharply as they had previously expected.
However, the relatively solid labor market conditions keep expectations of a gradual rate cut. Nonfarm Payrolls recorded the largest increase in more than a year, and the rate of decline was beyond expectations, supporting the belief that the Fed is likely to hold interest rates in March before opening the door to two more 25 basis points cuts by the end of the year.
On the geopolitical front, market participants are focused on the resumption of US-Iran nuclear talks and US-led peace efforts in Ukraine, both of which are set to resume on Tuesday. Disappointing developments have the potential to alter risk appetite and trigger flows into safe-haven assets, including gold.
Fundamentally, the precious metal remains supported by a combination of geopolitical tensions, strong central bank buying, and a shift in investor preference away from government bonds and currencies. However, as long as the market continues to balance dovish inflation signals with the resilience of the US economy, gold is likely to consolidate in the $5,000–$5,050 range while awaiting the next catalyst. (asd)
Source: Newsmaker.id
