Gold prices saw a modest rise in Asian trading on Thursday, marking a slight recovery from a challenging start to 2024. Investors are closely watching upcoming U.S. inflation data, seeking insights into the Federal Reserve’s intentions regarding potential interest rate cuts.
The yellow metal had faced substantial losses in the first week of January, prompting questions about the possibility of the Fed initiating rate cuts as early as March 2024. The uncertainty surrounding rate cuts contributed to a notable rebound in the dollar, putting additional pressure on gold. However, the greenback retraced some of its recent gains this week, and traders maintained their expectations for a March rate cut.
Gold prices experienced a degree of relief, though they remained within the $2,000-$2,050 an ounce trading range observed throughout most of December. Spot gold increased by 0.4% to $2,031.78 an ounce, while gold futures expiring in February rose by a similar margin to $2,035.80 an ounce by 00:09 ET (05:09 GMT). Despite being down around 1.7% in 2024, both instruments retained over a 10% gain from the previous year.
Investors are now eagerly awaiting the release of key U.S. Consumer Price Index (CPI) data for December. The headline CPI is expected to show a slight increase, while core CPI is anticipated to decline further. The persistently elevated inflation, coupled with recent signs of labor market resilience, may impact expectations for early interest rate cuts.
Traders, however, have maintained their expectations for a 25 basis point cut in March, with the CME Fedwatch tool indicating a 67.1% chance for a cut. This is up from the 60.8% seen a day ago and the 64.7% recorded last week.
While expectations for early rate cuts experienced a resurgence, the general consensus suggests at least 100 to 150 basis points of rate cuts in the current year. Lower interest rates typically favor gold, which faces higher opportunity costs in a high-rate environment due to its lack of yield.
In the realm of industrial metals, copper prices saw a notable increase on Thursday, alleviating some pressure from a stronger dollar. Copper futures expiring in March rose by 0.6% to $3.8112 a pound. Despite this rebound, copper is still recovering from a sluggish start to 2024, as weak economic indicators globally raised concerns about slowing manufacturing activity and its potential impact on copper demand.
Investors are now turning their attention to trade and inflation figures from China, scheduled for release on Friday, seeking further economic cues for the world’s largest copper importer.