Gold Holds Steady After Sharp Drop

Gold prices hovered near a two-month low on Thursday as investors assessed comments from two Federal Reserve officials on unexpectedly high January inflation that has tempered hopes for swift and deeper interest rate cuts this year.

“After the sharp fall in gold prices (on Wednesday), we see some consolidation But the economic data due out today will provide more clarity.”

It will be important to watch the dollar’s move as it could retest its highs, which would weigh on gold prices, he added.

Federal Reserve Vice Chair for Supervision Michael Barr on Wednesday backed the “cautious approach” to cutting rates advocated by Chair Jerome Powell, while Chicago Fed President Charles Evans warned against waiting too long to lower rates.

The comments came in the wake of a surprise jump in U.S. consumer prices, which pushed gold down 1.4% on Tuesday, its biggest one-day drop since Dec. 4.

Traders are now pricing in 97 basis points of rate cuts for this year, up from about 85 basis points early on Wednesday but down from over 110 basis points before the inflation data. The first cut is likely in June.

Focus now turns to U.S. retail sales data due at 1330 GMT and producer price index figures due on Friday. At least three other Fed officials are due to speak later this week.

European stocks jump, supported by strong earnings

European shares rose on Thursday after a string of better-than-expected corporate earnings results and UK GDP data, with sentiment also supported by comments from European Central Bank President Christine Lagarde on slowing inflation in the euro zone.

By 08:15 GMT, the pan-European STOXX 600 index was up 0.6%, hovering near its highest level in two years.

The UK’s FTSE 100 index also rose 0.6%, as the British economy entered a recession in the second half of 2023, reinforcing bets that the Bank of England will move to ease monetary policy.

IEA: Global oil demand growth losing momentum

The International Energy Agency said on Thursday that global oil demand growth is losing momentum, and it lowered its growth forecast for 2024.

The agency said the pace of growth will slow to 1.22 million barrels per day in 2024, about half the rate of growth last year, due to factors including a sharp slowdown in Chinese consumption.

The agency had previously forecast demand growth of 1.24 million bpd in 2024.

“The post-pandemic era of large global oil demand growth is largely over,” the agency said.

Gold and dollar now:

Gold futures steady at $2,005/oz.

Spot gold up 0.06% at $1,993/oz.

Dollar index down 0.03% at 104.582

Other precious metals:

Palladium down 0.1% at $933.83/oz. It rose over 8% on Wednesday on short-covering.

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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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