Bloomberg — Gold fell ahead of U.S. inflation data due later this week that could provide more information on the path of interest rates from the Federal Reserve.
The precious metal was trading near $2,300 an ounce after falling about 3% this week as easing tensions in the Middle East dampened demand for “safe-haven” assets.
The market is now turning its attention to US monetary policy. The personal consumption expenditures index (PCE) – the Fed’s preferred measure of inflation, which will be released on Friday (26) – should show that price pressures remained elevated in March.
That would support bets to delay rate cuts, which is a headwind for gold as it doesn’t generate interest.
The chances of a reduction in US interest rates in June – the baseline scenario at the start of the year – have fallen rapidly in recent weeks, with the swaps market now pricing in just a 14% chance. Some traders in the market are now betting that the Fed will not make any cuts this year.
Gold is still up nearly 17% since mid-February despite signs that the Fed’s long-awaited change in course will be delayed.
Instead, it has been supported by rising geopolitical risk, central bank purchases and a sharp increase in buying by Chinese retail investors.
See more at bloomberg.com
