Gold Above $2,000 Ahead of Inflation Data: Heading for Second Weekly Decline

Gold is on track for its second consecutive weekly decline on Friday, after an unexpectedly strong US consumer price reading prompted traders to rethink their rate cut expectations, although the metal pared some losses after weak retail sales.

At the same time, gold prices managed to stay above the $2,000 per ounce level after ending Thursday’s trading session with gains.

Data this week showed that inflationary pressures remained intact, with US import prices rising by the most in nearly two years in January, while consumer prices increased more than expected last month. The market now awaits another inflation report – the US producer price index – due at 13:30 GMT.

The metal recovered some of its losses this week, rising about 0.6% on Thursday after US retail sales saw their biggest monthly decline since February 2023.

Data from the US Census Bureau showed that retail sales fell 0.8% to $700.3 billion on a monthly basis in January, against expectations of a 0.2% decline during the month, implying that the impact of monetary tightening is being transmitted to the real economy.

Data from the US Labor Department showed that initial jobless claims fell by 8,000 to 212,000 in the week ended February 10, compared to expectations of a decline to 219,000.

The Federal Reserve is expecting three rate cuts this year, and the Fed will update these expectations at its monetary policy meeting next month, where it is expected to keep rates steady. Traders expect the first cut to likely come in June.

US Treasury Secretary Comments on Inflation Data, Criticizes Market Reaction

US Treasury Secretary Janet Yellen said on Wednesday that the latest consumer price inflation data was “a little bit higher” than expected, but Americans should focus on the long-term trend of falling inflation, a strong economy and rising wages.

While Yellen reiterated that inflation is moving down, she said the market reaction to the inflation data was a “gross overreaction.”

Yellen told reporters that Americans have had a tough time with COVID-19 and that prices for some important things like rental housing and food were higher than they were before the pandemic, but wages have also risen more than prices.

“Over time, as inflation comes down to a very low level, and wages continue to rise, American households will feel more secure that this episode is behind them, and they will be able to see that they are getting ahead,” she said.

Oil Rises More Than 1% After US Data Impacts Dollar

Oil prices were mixed on Friday as investors weighed demand slowdown concerns against weaker US retail sales data that revived hopes for lower U.S. interest rates.

Brent crude futures fell 11 cents, or 0.1%, to $82.75 a barrel. US West Texas Intermediate (WTI) crude futures rose 2 cents to $78.04 a barrel.

Both benchmarks rose more than 1% on Thursday, as a larger-than-expected decline in US retail sales boosted hopes that the Federal Reserve will start cutting interest rates in the coming months, which could be positive for oil demand.

A U.S. Commerce Department report on Thursday showed that retail sales fell 0.8% last month, the biggest drop since February 2023. Economists polled by Reuters had forecast a decline of only 0.1% in retail sales.

The International Energy Agency’s monthly report said it expects global oil demand to grow by 1.22 million barrels per day this year, slightly below last month’s estimate. OPEC on Tuesday stuck to a higher growth forecast of 2.25 million barrels per day.

Gold and the Dollar Now

Gold futures are now up 0.08% at $2,016 per ounce.

Spot gold is up 0.03% at $2,005 per ounce.

On the other hand, the dollar index is up about 0.08% at 104.275.

Other Metals

Platinum fell 0.4% in spot trading to $894.19 an ounce, palladium fell 0.7% to $946.76, while silver rose 0.2% to $22.96.

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Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances, or needs.

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