The price of gold maintained its three-day upward trend following a key US inflation report that reinforced market expectations of a Federal Reserve interest rate cut in the coming week.
Table Content:
- November Inflation Data Supports Fed Rate Cut Expectations
- Gold’s Ascent Fueled by Fed Policy, Safe-Haven Demand, and Central Bank Buying
- China’s Strategic Gold Purchases and Technical Factors Bolster Gold Prices
- Gold Price Update and Market Overview
- Conclusion: Gold Remains Resilient Amidst Economic Uncertainty
November Inflation Data Supports Fed Rate Cut Expectations
The US consumer price index (CPI) for November showed a steady rise in line with forecasts. Core CPI, excluding volatile food and energy prices, increased by 0.3% for the fourth consecutive month, representing a 3.3% year-over-year increase, according to data released Wednesday by the Bureau of Labor Statistics.
Following the release, Treasury yields dipped, contributing to a slight increase in gold prices. Swap traders maintained their bets on a Fed rate cut next week.
Gold’s Ascent Fueled by Fed Policy, Safe-Haven Demand, and Central Bank Buying
Gold reached a record high exceeding $2,790 per ounce in October, propelled by the Fed’s shift towards monetary easing, increased demand for safe-haven assets, and significant purchases by central banks. The precious metal, which has surged over 30% this year, received an additional boost recently when the People’s Bank of China (PBOC) announced the resumption of gold purchases after a six-month hiatus.
Analysts at Goldman Sachs Group Inc. suggest that the PBOC, holding substantial USD reserves and a strategic focus on reserve diversification, “may even increase gold demand during periods of local currency weakness to boost confidence in their currency.”
China’s Strategic Gold Purchases and Technical Factors Bolster Gold Prices
Goldman Sachs noted in a Tuesday report that China has consistently acquired gold “systematically” through the over-the-counter market in London during periods of yuan depreciation, including 2014-2016, 2018-2020, and from 2022 to the present.
Technical factors also contributed to gold’s strength, with trading volumes rising as futures this week decisively broke out of a consolidation phase, according to Chris Weston, head of research at Pepperstone Group Ltd.
Gold Price Update and Market Overview
As of 9:35 a.m. in New York, spot gold was up 0.2% at $2,700.52 per ounce, building on Tuesday’s 1.3% gain. The Bloomberg Dollar Spot Index edged up 0.1%. Conversely, silver, platinum, and palladium experienced declines.
Conclusion: Gold Remains Resilient Amidst Economic Uncertainty
The latest US inflation data and continued expectations of a Fed rate cut provide ongoing support for gold prices. Combined with safe-haven demand and strategic central bank buying, particularly from China, the outlook for gold remains positive in the near term. While the dollar saw a slight increase, gold’s resilience suggests continued investor confidence in the precious metal as a hedge against economic uncertainty.
