Gold prices saw a significant rise and reached a record level during Monday’s trading,
as expectations for a cut in interest rates in the United States were bolstered by a decline in the inflation rate.
The lack of surprises in the core Personal Consumption Expenditures (PCE) Price Index could push gold prices to new record levels.
The current core reading is the lowest in nearly two years, which might prompt the U.S. Federal Reserve to cut interest rates soon.
Data released on Friday showed that prices in the United States moderated in February, with the PCE Price Index rising by 0.3%.
Federal Reserve Chairman Jerome Powell indicated that the recent U.S. inflation data aligns with their expectations,
suggesting that a rate cut in June was on the table.
Traders are expecting a 69% chance that the Federal Reserve will begin cutting interest rates in June.
It’s worth noting that gold prices recorded their largest monthly increase in over three years in March,
thanks to expectations of interest rate cuts, strong demand for gold as a safe haven, and central bank purchases.
Gold futures ended last week at $2238.4 per ounce, achieving weekly and monthly gains of 2.6% and 7.9%, respectively.
Gold also posted a 6% gain during the first quarter of 2024, reaching new record levels during nine sessions in March.
Gold prices saw no significant movement during Thursday’s trading after closing at record levels in the previous session.
Investors are waiting for more U.S. economic data to get clues about the direction of monetary policy.
The U.S. Federal Reserve has expressed its desire to cut interest rates, and there are ongoing concerns in the markets about geopolitical risks in areas such as Ukraine and the Middle East, which supports its prices.
Gold prices are currently on an upward trend, and breaking the current resistance level at $2225 per ounce could lead gold prices towards the $2300 level.
Currently, central banks are still buying gold to diversify their reserves, which compensates for the weak demand for gold as an investment. The current demand is more based on expectations of a reduction in interest rates in the United States.
Expectations
Investors are awaiting the release of the U.S. core Personal Consumption Expenditures (PCE) Price Index report on Friday to determine when the U.S. central bank may start cutting interest rates. The report is expected to show a 0.3% increase in February, maintaining the annual pace at 2.8%. Investors’ attention will also be focused on the report of weekly initial jobless claims later in the day.
Gold prices witnessed an increase during the current trading period on Monday,
due to escalating tensions in the Middle East, boosting the metal’s attractiveness as a safe haven.
Prices surpassed the $2050 per ounce level.
This rise comes as traders await the U.S. interest rate decision and statements from Federal Reserve Chairman Jerome Powell this week to gather insights on the interest rate path. Investors express concern over increasing geopolitical tensions following an incident targeting U.S. forces near the Syrian border in Jordan, where three individuals were killed in a drone strike.
The Federal Reserve is expected to keep interest rates unchanged in its upcoming meeting on January 30-31.
However, much attention will be focused on Powell’s statements.
According to data released on Friday, U.S. prices moderately increased in December,
sustaining inflation below 3% for the third consecutive month.
This could provide the Federal Reserve an opportunity to begin interest rate cuts this year.
According to the U.S. Department of Commerce, the core personal consumption expenditures (excluding food and energy) rose by 0.2% monthly in December and increased by 2.9% annually, compared to expectations of 0.2% and 3%, respectively.
Consumer spending also showed an increase of 0.7% in December, surpassing expectations of 0.5%.
Investors Focus on Federal Reserve Meeting This Week:
The current week started with stability for the dollar as investors analyze U.S. economic data ahead of the Federal Reserve’s meeting.
Simultaneously, reduced geopolitical tensions in the Middle East diminish investors’ risk appetite.
The Dollar Index, measuring the performance of the U.S. currency against a basket of six major currencies,
remained close to its six-week high at 103.50 on Monday, near the level of 103.82 recorded last week.
The index is set to register a 2% increase in January, following diminished expectations of significant and immediate U.S. interest rate cuts.
Investors’ focus this week is on the Federal Reserve’s monetary policy meeting, which will last two days starting Tuesday.
The central bank is widely expected to keep interest rates unchanged,
and investors are keenly awaiting statements from Fed Chair Jerome Powell.
Investors will also monitor a series of economic data,
including U.S. jobless claims and employment reports, helping assess the strength of the job market.
People’s Bank of China Aims to Maintain Acceptable Liquidity in the Banking System:
The People’s Bank of China (PBOC) injected CNY 500 billion (USD 70 billion) into the banking system on Monday through seven-day reverse repos with an interest rate of 1%. According to the central bank, this move aims to “maintain sufficient and available liquidity in the banking system.”
The reverse repos, also known as “reverse repo,” involve the central bank buying securities from commercial banks through bids,
with an agreement to sell them back at a later time.
In the foreign exchange market, the Chinese yuan declined against the dollar by 23 basis points,
reaching 7.1097 yuan per dollar compared to 7.1074 yuan at the end of the previous Friday’s trading.
It’s worth noting that Chinese rules allow the yuan to fluctuate up to 2% around the central parity rate set
by the central bank in each foreign exchange market trading session.
The guidance rate for the yuan against the dollar is determined based on buying rates provided by major financial institutions
before the start of interbank trading daily.
Gold prices rose on Wednesday, supported by expectations
that the U.S. Federal Reserve will cut interest rates in 2024.
Gold jumped 0.1% to $2,079.74 an ounce,
its highest level since early December. Gold has risen 14% so far this year
and is on track for its first annual gain in three years.
Investors are expecting the Fed to cut rates in 2024 in an effort to combat slowing inflation.
Lower interest rates lead to lower bond yields,
making gold more attractive to investors seeking a safe haven.
Expectations of rate cuts are expected to continue to support gold prices in the coming months.
Analysis
The rise in gold prices is a sign that investors are still seeking safe-haven assets amid the ongoing uncertainty in global markets. Rising inflation and geopolitical risks are driving demand for gold.
Investors are expected to continue to seek safe-haven assets in the coming months,
which could lead to further gains in gold prices.
Gold prices rise on expectations of U.S. rate cuts
Gold nears new record on expectations of U.S. rate cut
Gold prices rose on the first day of the last week of 2023,
as investors looked to a potential interest rate cut by the U.S. Federal Reserve in 2024,
as well as a weakening U.S. dollar.
Gold prices continued to rise on the first day of the last week of 2023, nearing a new record high of $2,072.22, on track to record its first annual gain in three years. The data showing a decline in U.S. inflationary pressures has bolstered expectations of multiple rate cuts in 2024.
A report released last week showed that the core personal consumption expenditures (PCE) price index, the Federal Reserve’s preferred inflation gauge, rose by a very small amount in November, just shy of the central bank’s target of 2%.
Markets now expect a 75% chance of a rate cut by the Federal Reserve by March 2024, which could benefit assets that do not offer yields, such as gold, despite some central bank officials ruling out early easing.
Conclusion:
Gold prices rose by 0.6% to $2,064.45 per ounce after gaining 1.7% last week.
The Bloomberg Dollar Spot Index, which measures the dollar’s strength against a basket of currencies,
fell by 0.1%. Silver and palladium prices rose, while platinum prices remained flat.
Gold nears new record on expectations of U.S. rate cut
Gold prices rose in early trading on Wednesday, extending gains for a third consecutive session,
as expectations grew that the US Federal Reserve (Fed) will cut rates next year.
According to data from City Gold, the price of an ounce of gold in spot trading rose 0.5% to $1,011.50,
while the price of an ounce of gold in futures contracts rose 0.6% to $1,012.70.
The gains come as investors await data on US inflation,
which is scheduled to be released later this week.
November inflation data came in higher than expected,
leading to expectations that the Fed would raise rates early next year.
However, the US central bank signaled last week that the tightening cycle has ended,
suggesting that rates could be cut next year.
Atlanta Fed President Raphael Bostic said on Tuesday that there is no “pressing need” to cut rates
at this time given the strength of the economy.
Gold is seen as a safe haven for investors amid rising inflation and geopolitical risks.
Gold continues to rise on expectations of rate cuts
Dollar decline, U.S. Treasury bond rise support precious metal
Gold prices rose on Wednesday, hitting their highest level in six months
after comments from Federal Reserve officials boosted bets that
the U.S. central bank could start cutting interest rates next year.
The U.S. dollar fell against most major currencies, and U.S. Treasury bond prices rose
after Federal Reserve Governor Christopher Waller said that U.S. monetary policy is working well to bring inflation back to the central bank’s 2% target, suggesting that there may be no need to raise interest rates again.
Typically, the impact of lower borrowing costs is negative for non-yielding bullion, but in the current environment, expectations of rate cuts could support gold prices, as investors view the precious metal as a safe haven in the event of an economic recession.
Gold prices
Gold prices have risen more than 12% since early October, driven by safe-haven buying following the conflict between Israel and Hamas, and investors’ expectations of U.S. rate cuts.
As investors prepare for U.S. inflation data, traders are leaning towards an economic slowdown and monetary easing.
Spot gold rose 0.4% to $2,048.29 an ounce at 9:19 a.m. Singapore time. The Bloomberg Dollar Spot Index fell further after dropping 0.4% in the previous session. Silver, platinum and palladium prices also rose.
Gold continues to rise on expectations of rate cuts
Gold Stabilizes with Second Weekly Gains Amid Weakening Dollar
Gold continues to achieve gains for the second consecutive week, as prices stabilized on Friday, supported by the decline in the US dollar. Reports indicate growing market confidence that the Federal Reserve has concluded its interest rate hikes.
At 0205 GMT, gold prices in spot transactions remained at $1992.46 per ounce, marking a 0.7% increase for the week.
Futures contracts for gold showed little change, recording $1993.40.
Tim Wotter, senior market analyst at K.C.M. Trade,
noted that “the dominant themes in the financial markets over the past week were declining yields and a weaker US dollar, contributing to the rise in gold prices.”
In this context, the dollar index fell by 0.2% against its counterparts,
heading for its second weekly decline, making gold more attractive to holders of other currencies.
With the yield on 10-year US Treasury bonds rising to 4.4568%,
markets lowered their expectations for interest rate cuts in 2024.
This followed data showing a larger-than-expected decline in new unemployment benefit claims in the US last week.
The most important expectations
However, strong job data did not change expectations for a slowdown in the US labor market amid rising interest rates. Fiduciary, a C.M.E. Group subsidiary, expects the Federal Reserve to leave interest rates unchanged in December, with a roughly 26% chance of a rate cut in March.
A potential interest rate cut is expected to reduce the alternative opportunity cost of holding gold.
Regarding other precious metals, silver rose to $23.69 per ounce,
while palladium increased to $1049.55, and platinum remained at $915.57,
heading for its second consecutive weekly gain.
Gold Stabilizes with Second Weekly Gains Amid Weakening Dollar
The Gold Prices Drop Below $2000 Due to the Stability of the US Dollar
After a period of decline in the gold market, prices of this precious metal reached levels below $2000 per ounce on Wednesday, following the stabilization of the US dollar, which had seen a decline in the past few days. This decline coincides with expectations that the US Federal Reserve will halt its monetary tightening policies, mitigating the downward pressure on gold prices.
Gold prices in spot transactions recorded a 0.1% decrease, reaching $1996.79 per ounce,
after reaching its highest levels in three weeks at $2007.29 in the previous session.
Similarly, US gold futures also experienced a 0.1% decline, reaching $1998.80.
This comes in the context of the stability of the dollar against other major currencies, after it reached its lowest levels in two and a half months in the previous session.
The decline in the value of the dollar is attributed to the improved purchasing power of holders of other currencies,
making gold less costly for them.
During the recent meeting of the US Federal Reserve officials, a commitment to “caution” in adopting interest rate policies was reaffirmed, with rates only being raised in the event of inflation deterioration, according to the meeting minutes held on November 1.
The most important expectations
Market expectations widely anticipate that the US central bank will leave interest rates unchanged at the December meeting, with a chance of up to 60% of a 25 basis points interest rate cut by May.
Real estate sales in the United States hit their lowest levels in over 13 years in October, influenced by the rise in mortgage interest rates over the past two decades and the scarcity of supply in the market, prompting buyers to stay away from the market.
US Treasury bond yields for 10-year terms are near their lowest levels in two months, touching them last week.
As for other precious metals, silver rose by 0.3% in spot transactions, reaching $23.79 per ounce, while the price of platinum remained stable at $931.34, and palladium fell by 0.6% to $1072.35.
The Gold Prices Drop Below $2000 Due to the Stability of the US Dollar
Hong Kong’s Triumph: A New Era in Russian Gold Trade
Embracing Change in Gold Trade Dynamics
In a paradigm-shifting move, Hong Kong has emerged as the premier destination for Russian gold, outpacing Dubai’s historical dominance. The surge in imports, a staggering fourfold increase from the preceding year, highlights a seismic shift in the precious metals trade landscape.
The strict sanctions imposed by the United States have sent shockwaves through international trade. However, Hong Kong’s resilience is evident as it not only withstands but thrives amidst these challenges, providing a sanctuary for the Russian gold trade.
Stringent UAE Regulations: A Catalyst for Change
While Dubai grapples with stringent regulations in the precious metals sector, Hong Kong capitalizes on the regulatory vacuum, becoming a haven for Russian gold.
This shift underscores the importance of regulatory environments in shaping global trade dynamics.
Chinese Purchases: A Mitigating Force
Amidst the turbulence of global embargoes, Chinese purchases emerge as a crucial mitigating force. By engaging in significant transactions, China not only supports Russian trade but also cements Hong Kong’s position as the new epicenter for Russian gold.
Ripple Effects Across International Markets
The repercussions of this shift extend far beyond Hong Kong and Dubai, influencing global trade dynamics. As the gold trade landscape undergoes a metamorphosis, various nations recalibrate their strategies and partnerships.
Industry Voices: Insights and Perspectives
Hong Kong’s Ascendancy: Experts Weigh In
Experts from the precious metals industry provide insights into the factors contributing to Hong Kong’s ascendancy in the Russian gold trade. Their perspectives shed light on the multifaceted nature of this transformative journey.
Conclusion
As Hong Kong emerges triumphant in the realm of Russian gold trade, surpassing Dubai and weathering the storm of international sanctions, a new era dawns for global commerce. The intricate dance between geopolitics, regulations, and strategic alliances shapes this transformative journey. Whether this shift heralds a permanent realignment or a temporary disruption remains to be seen, but its impact on global trade is undeniable.
Hong Kong’s Triumph: A New Era in Russian Gold Trade
