Gold prices experienced a notable uptick on Friday as traders braced for the upcoming release of the US January Consumer Price Index (CPI) data. This data, set to be unveiled at 8:30 AM ET, is expected to provide insight into inflation trends that could influence the Federal Reserve“s monetary policy.
On Friday, gold futures for April delivery rose by 0.8%, reaching $4,990 per ounce. Meanwhile, spot gold saw an increase of 1.1%, trading at $4,973.49 per ounce after suffering a decline of over 3% the previous day. This rebound marks a significant recovery for the precious metal.
The anticipated CPI data is closely monitored by market participants, as it has the potential to shape expectations surrounding interest rate movements by the Federal Reserve. According to analysts from Deutsche Bank, a monthly inflation rate of 0.26% is expected for January, a decrease from December”s rate of 0.31%. The year-on-year inflation rate is projected to fall to 2.5%, primarily due to a significant drop in motor fuel prices.
Safe haven demand for gold has also increased amid rising geopolitical tensions. Reports have indicated that the US is preparing to deploy a second aircraft carrier, the USS Gerald R. Ford, to the Middle East, as negotiations regarding Iran”s nuclear program seem to be stalling. This development has added further support to gold prices.
In addition to gold, other precious metals are also seeing gains. Spot silver climbed by 4% to $78.703 per ounce following a previous decline of approximately 10%. Spot platinum rose by 0.6%, moving back above the $2,000 threshold, trading at $2,034.65 per ounce.
The US dollar exhibited strength ahead of the inflation release, with the dollar index increasing by 0.2% to 97.05. The pound sterling remained steady at $1.3617 against the dollar during Friday”s trading session.
While analysts are closely watching the CPI report, some experts believe its impact on the market may be less significant compared to the strong labor market data released earlier in the week. A robust nonfarm payrolls report has contributed to a prevailing sentiment that the Federal Reserve is in no rush to implement aggressive rate cuts.
The upcoming CPI data will provide crucial insights into inflation trends and could affect the attractiveness of gold as an investment. Higher interest rates typically diminish the appeal of non-yielding assets like gold, while a stronger dollar can also exert downward pressure on prices.
Overall, the market remains vigilant as traders prepare for the impending inflation data release, which could have lasting implications for both gold and broader financial markets.
