Feb 29 2024: Gold Prices Remain Stable Amid Pre-Inflation Jitters and Fed Remarks
During Asian trading on Thursday, gold prices remained largely unchanged as traders exercised caution ahead of crucial U.S. inflation data, which could impact the direction of interest rates.
Moreover, the precious metal faced downward pressure from remarks made by Federal Reserve officials overnight, suggesting that the central bank still needed to address inflation concerns. These comments added to a chorus of voices indicating that the Fed was not rushing to initiate interest rate cuts prematurely.
Persistent worries about enduring high interest rates confined gold trading within a narrow range of $2,000 to $2,050 per ounce for almost two months. Investors hesitated due to the potential increase in the opportunity cost associated with holding gold.
Spot gold stabilized at $2,035.26 an ounce, while April gold futures showed no significant movement at $2,043.45 an ounce by 00:38 ET (05:38 GMT).
All eyes were now on the Personal Consumption Expenditures (PCE) price index data, which is the Fed’s preferred gauge of inflation, scheduled for release later in the day. Analysts expected the data to confirm that U.S. inflation remained stubbornly high in January, particularly following an unexpectedly strong consumer inflation report for the month.
This release followed comments from Fed officials John Williams and Raphael Bostic, emphasizing the need for further action from the central bank to achieve the 2% inflation target. These remarks, along with similar warnings from other officials, cast doubt on expectations of early rate cuts by the Fed in 2024.
While market participants still priced in a 52.6% probability of a rate cut in June, there was a gradual increase in expectations that the Fed might opt to maintain rates at that time, according to the CME Fedwatch tool.
The prospect of prolonged high interest rates is likely to bolster the dollar and exert additional pressure on gold and other precious metals.
Platinum futures edged up by 0.5% to $888.40 an ounce, while silver futures saw a 0.3% increase to $22.705 an ounce. However, both metals were grappling with losses ranging from 2% to 5% for February, while gold was poised to finish the month unchanged.
In the realm of industrial metals, copper prices remained range-bound on Thursday, with attention shifting to key economic indicators from China, the largest importer of copper globally.
March copper futures recorded a modest 0.4% rise to $3.8540 per pound but were on track to register a 1.3% decline for February, breaking a three-month winning streak. The focus was primarily on upcoming Purchasing Managers Index (PMI) readings from China, which could provide further insights into the economic outlook for the world’s leading copper importer.