Gold Set for First Weekly Drop in Four Weeks Amid Fading Rate Cut Expectations

Gold prices remained stable on Friday, poised to record their initial weekly decline in four weeks, as investors adjusted their outlook for a U.S. interest rate reduction following data indicating rising inflationary pressures throughout the week. Spot gold remained relatively unchanged at $2,159.99 per ounce as of 2:42 p.m. EDT (1842 GMT).

This marks a decrease of 0.8% for the week, marking the first weekly drop since mid-February, subsequent to reaching a peak of $2,194.99 last week.

The data released this week indicated that U.S. consumer prices surged beyond anticipated levels in February, while producer prices also demonstrated resilience in inflationary pressures.

Everett Millman, chief market analyst at Gainesville Coins, remarked, “Gold has already factored in any potential positive impact stemming from expectations of declining interest rates… If inflation begins to accelerate once more, it implies that policymakers will need to maintain a more restrictive monetary policy stance for an extended period.”

Millman further noted, “Even though gold isn’t typically favored in a high-interest-rate climate, if interest rates remain elevated due to significant inflationary pressures, people will naturally revert to gold.”
The persistence of higher-than-anticipated inflation continues to compel the Fed to sustain elevated interest rates, which in turn exerts downward pressure on gold. Additionally, as a non-yield-bearing asset, gold serves as a hedge against inflation.

Traders are still betting on interest rate cuts in June, although the likelihood has decreased slightly to 59% from 72% before the CPI data, as indicated by the CME FedWatch Tool.

Meanwhile, the U.S. dollar index is on track for its most significant weekly gain since mid-January, which renders gold more costly for international purchasers.

Goldman Sachs, in a note, stated, “We are revising our average gold price forecast for 2024 upwards from $2,090 per ounce to $2,180 per ounce, with an anticipated rise to $2,300 per ounce by the end of the year.”

Spot platinum saw a 1.5% increase, reaching $940.95 per ounce, while palladium gained 1.2% to $1,082.61 per ounce. Additionally, silver experienced a 1.7% rise, reaching $25.25 per ounce.

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