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Gold prices rangebound as rate fears persist, inflation cues awaited

Published 02/26/2024, 12:15 AM
Updated 02/26/2024, 12:15 AM
© Reuters.

Investing.com-- Gold prices retreated in Asian trade on Monday, remaining well within a recent trading range as anxiety over higher-for-longer U.S. rates grew in anticipation of key economic readings. 

The yellow metal failed to make any major price headway in recent weeks as a string of Federal Reserve officials warned that the bank was in no hurry to cut interest rates.

Signs of sticky U.S. inflation and resilience in the job market furthered this notion, with traders now steadily pricing out chances of rate cuts in May and June

Still, some safe haven demand for gold helped limit losses in the yellow metal. Signs of a recession in Japan and the UK, coupled with continued geopolitical disruptions in the Middle East fed into safe haven demand. 

Spot gold fell 0.2% to $2,032.32 an ounce, while gold futures expiring in March fell 0.4% to $2,041.85 an ounce by 23:52 ET (04:52 GMT). 

PCE inflation, GDP data in focus 

Focus was now squarely on U.S. PCE price index data- the Fed’s preferred inflation gauge- which is due later this week. The reading is expected to offer more cues on U.S. inflation after a series of sticky readings for December and January.

Several Fed officials are also set to speak later this week, and are expected to largely reiterate the bank’s outlook for higher-for-longer rates, amid concerns over high inflation.

Beyond the PCE data, a second reading on fourth-quarter gross domestic product is also due this week, and is expected to show some cooling in U.S. economic growth. But not to an extent that warrants early interest rate cuts.

Higher-for-longer rates bode poorly for gold prices, given that they increase the opportunity cost of investing in the yellow metal.

Other precious metals also retreated on this notion. Platinum futures expiring April fell 0.7% to $901.35 an ounce, while silver futures expiring May fell 0.5% to $23.078 an ounce.

Copper retreats, China PMI test awaited 

Among industrial metals, copper prices fell slightly on Monday, retreating from recent gains as markets awaited more key economic signals from China this week.

Copper futures expiring in May fell 0.2% to $3.8760 a pound.

Focus this week is largely on purchasing managers index data from top copper importer China, which is expected to offer more cues on a potential economic recovery in the country. 

Chinese media reports offered some positive cues. Chinese President Xi Jinping in a recent address emphasized on the importance of logistics and supply chains for the Chinese economy, while also promoting a new round of equipment renewals in the country, which could help increase industrial and factory activity.

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