Gold Awaits GDP & PCE Signals: Will It Boom or Falter?
The price of gold (XAU/USD) moved sideways around the psychological level of $5,000 during the Asian session on Friday. After rising slightly over the past two days, gold has been unable to continue its surge as market participants prefer to wait for significant data from the US before taking new positions.
The market's primary focus now is on the Advance Q4 GDP and PCE Price Index. These two data points often serve as a "compass" for reading the direction of the Fed's policy: if the economy remains strong and inflation remains stubborn, the chances of an interest rate cut could be further pushed back, which usually holds gold back.
From the Fed's perspective, the minutes of the January FOMC meeting showed the central bank was in no rush to cut interest rates. There was even discussion of the possibility of raising interest rates if inflation does not fall as expected. This tone has made the market more cautious about rate cut expectations.
Meanwhile, recent data also shows that the US labor market remains strong, coupled with hawkish comments from Fed officials. This combination has led to expectations of aggressive interest rate cuts beginning to wane, and as a result, the US dollar has strengthened to its highest level since January 23rd.
The strengthening dollar acts as a brake on gold, as it is non-yielding. However, gold's decline also appears limited, as safe-haven sentiment remains strong due to rising geopolitical tensions.
The geopolitical trigger came from the escalating US-Iran issue. Trump issued a stern warning, stating that Iran has a 10-15 day deadline for a nuclear deal, while Iran responded that it doesn't want war but is prepared to retaliate if attacked. This risk of escalation keeps gold cushioned, so the market tends to wait for confirmation from US data before choosing a more decisive direction.
5 key points below:
- Gold consolidates around $5,000, with the market holding its positions ahead of major US data.
- Focus on Q4 GDP & PCE, as they could alter expectations regarding the Fed's rate cut path.
- FOMC Minutes: The Fed is in no rush to cut interest rates, even discussing the option of raising rates if inflation persists.
- The dollar strengthened (supported by expectations of a rate cut) → putting pressure on gold.
- Heated US-Iran geopolitics maintained safe-haven demand, keeping gold's downside relatively contained. (asd)
Source: Newsmaker.id
