The US Federal Reserve’s preferred inflation gauge, the core personal consumption expenditures (PCE) price index, showed a slowdown in November, potentially paving the way for lower borrowing costs in 2025. This positive inflation news triggered a rally in gold prices, offering some relief after recent market volatility.
The core PCE, which excludes volatile food and energy prices, rose just 0.1% from October, marking the slowest monthly increase since May. Year-over-year, the core PCE increased by 2.8%. This data, released by the Bureau of Economic Analysis, signals renewed progress in the fight against inflation after a period of stagnation. Earlier this week, the Federal Reserve updated its forecasts, projecting higher prices and interest rates in 2025, leading to a broad market sell-off on Thursday.
Friday’s positive inflation data prompted a decline in Treasury yields and the US dollar, bolstering gold prices by as much as 1.5%. This surge helped mitigate the precious metal’s weekly losses. Despite the encouraging inflation report, swap traders continue to anticipate less than two quarter-point interest rate cuts by the end of next year.
Gold has experienced a remarkable 27% surge this year, driven by factors including monetary easing policies in the US, safe-haven demand amid global uncertainties, and consistent purchases by central banks worldwide. However, the rally has lost momentum since early November, partially attributed to Donald Trump’s US election victory and its subsequent impact on the dollar.
As of 12:28 p.m. in New York on Friday, spot gold was trading at $2,626.00 an ounce, reflecting a 1.2% increase for the day but still on track for a 0.8% weekly loss. Other precious metals, including silver, platinum, and palladium, also experienced gains. This recent uptick in gold prices underscores the metal’s sensitivity to economic data and its continued role as a safe-haven asset in times of market uncertainty. The cooling inflation data provides a glimmer of hope for sustained economic recovery and potentially further boosts to gold prices in the coming months.
