Gold prices rose slightly on Friday as markets await US inflation data for next week, which could affect the Federal Reserve’s monetary policy direction. Analysts interpret the market and share their forecasts.
“Significant and continuous progress is needed on the inflation front for relief”
Investors are waiting for US consumer price data to be released on February 14. While there is plenty of concern about a global recession, the strong rally in world markets indicates the return of optimism that could ease the Fed’s rate hike cycle. According to the Department of Labor’s annual CPI data revision, the consumer price index rose 0.1% in December instead of falling 0.1% as reported last month. According to a Reuters poll of economists, data for next Tuesday will likely show CPI rising 0.4% month-on-month. Bart Melek, head of commodity markets strategy at TD Securities, comments:
We will need to see significant and sustained progress on the inflation front before officials on the monetary side of things feel comfortable letting rates fall.
“US CPI report can play an important role for gold prices”
Money markets now expect a peak of around 5.15% in July in the current Fed rate cycle. Michael Hewson, chief market analyst at CMC Markets, shares his prediction:
Next week’s US CPI report could play a big role in where gold is headed. Also, further upside pressure on yields could potentially act as a heavyweight if we break below the $1,850 support.
According to ActivTrades senior analyst Ricardo Evangelista, there is still uncertainty on the Fed’s path and gold’s move will depend on what the Fed does next. In this context, the analyst makes the following statement:
If core inflation is below expectations, then it will have a negative impact on the dollar and help gold. However, if inflation does not fall, the Fed will continue to raise interest rates, which will punish gold.
“The next break for gold prices will be the US CPI data”
cryptocoin.comAs you follow in , Richmond Fed President Thomas Barkin said on Thursday that tight monetary policy has “definitely” slowed down the US economy and allowed the Fed to act “more deliberately” with any rate hikes. We expect rising gold prices in the second half of the year to push up the price of silver as well,” Commerzbank analysts said in a note.
Stronger-than-expected US employment numbers last week contributed to expectations that the Fed will end the rate hike cycle by more than 5%, causing rate cut expectations for the second half of this year to fly further, according to Tastylive head of global macro Ilya Spivak. it happened.
Ilya Spivak states that gold prices have been in a consolidation mode for the past few days and are struggling to find direction, adding that the next major breaking point will likely be the US CPI report next week.
“Gold will consolidate first, then move on”
Libertas Wealth Management Group chairman Adam Koos says gold has been struggling this week, largely due to some profits after the big gain since early November and recent fears that the Fed will raise interest rates higher and/or longer than originally expected. . Accordingly, the analyst makes the following assessment:
All of this was driven by volatile economic news, which paints a mixed picture for investors and makes it extremely difficult to predict what the Fed’s next move will be. In particular, employment reports, special payrolls and unemployment figures were decisive.
Adam Koos says he assumes the Fed will accept another hike at the next meeting, but that it will “continue to be a quarter point increase”. The analyst expects gold to consolidate around these levels, followed by higher prices to continue into late February and into March.
“Precious metals are out of favor!”
On Friday, market analysts attributed weakness in gold to the reviving US dollar and higher Treasury yields. City Index market analyst Fawad Razaqzada comments:
Precious metals fell out of favor as bond yields rose and the dollar remained supported, with gold hovering around $1,860 and silver just above $22.00. In recent days, the dollar has rebounded and supported bears in response to the Fed’s hawkish comments and mixed data.
“This will lead to a significant structural rise in gold”
Also, some analysts say traders are reluctant to open new long positions ahead of Tuesday’s US consumer price index inflation report. On Friday, the US consumer sentiment survey showed an 11-month high of 66.4 in early February, up from 64.9 in January. This shows that Americans are cautiously optimistic about the economy.
Looking at the bigger picture, however, analysts at ICICI Bank note in a research note released Friday that gold prices have continued to rise year-over-year. They say they saw some ‘consolidation’ for gold prices in the first half of this year. That’s because US yields remained high due to the policy guidance the Federal Open Market Committee will likely provide. In addition, ICICI Bank analysts make the following assessment:
Despite this, we maintain our expectations that the FOMC will go into ‘pause mode’ for interest rates after the May policy meeting and will initiate possible rate cuts in the first quarter of 2024. This will lead to a significant structural rise in gold prices in the second half of the year.
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