Gold prices are once again above the $2,000 mark, reaching $2,003.87 per ounce. The unexpected drop in U.S. retail sales for January, the largest decrease in 10 months, has had a significant impact on the gold market. The weak retail sales caused the U.S. dollar and government bond yields to fall, opening an opportunity for gold prices to rebound.
The drop in sales was higher than what was anticipated, and a separate report from the Labor Department revealed that initial jobless claims fell by 8,000 last week to a seasonally adjusted 212,000. As a result, the U.S. dollar index extended losses and the benchmark 10-year government bond yield fell, which made non-yielding gold more attractive to overseas buyers.
Chris Gaffney, president of global markets at EverBank, stated that the main factor influencing gold in the short term is interest rate expectations, adding that there is still a risk that gold will face pressure before the Fed actually announces it is time to cut interest rates.
Despite the positive movement in gold prices, the possibility of a cut in interest rates also remains uncertain. The latest data from CME’s “Fed Watch” suggests that the probability of the Fed keeping interest rates unchanged is 89.5% in March, with only a 10.5% chance of a 25 basis points interest rate cut.
The focus now shifts to speeches from Federal Reserve officials and the release of Friday’s producer price index. At least three more Fed officials are expected to speak later this week, and investors are watching for any clues on the timeline for potential rate cuts.
The fluctuation in gold prices is expected to continue as the market awaits additional financial data and events. The outcome of these upcoming events will play a crucial role in determining the future direction of gold prices and the potential for a rate cut by the Federal Reserve.
At 07:47 Beijing time, spot gold was trading at $2,003.83 per ounce. The market remains attentive to fluctuations in gold prices and potential developments that could impact its performance.