Gold eyes 9-month high as markets contemplate US rate hike

Published January 23rd, 2023 - 02:26 GMT
Gold prices keep going up
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Gold prices rose slightly on Monday, trading close to a nine-month high as markets awaited more United States data this week to gauge whether the world’s largest economy was facing a potential recession in 2023.


Trading volumes in metal markets were also relatively smaller at the beginning of the week, amid market holidays in several Asian countries, most notably China, for the Lunar New Year. Chinese markets will be closed for the remainder of the week.

 

Focus this week is squarely on U.S. fourth-quarter GDP data, due on Thursday. Growth is expected to have slowed in the fourth quarter from the third, as the effects of tighter monetary policy begin to be felt by the economy.

 

Spot gold rose 0.2 percent to $1,928.95 an ounce, while gold futures rose 0.1 percent to $1,930.50 an ounce at 00:32 GMT. Both instruments were trading close to their highest level since late-April and were less than $100 away from record highs.

 

Bullion prices have rallied in recent weeks on a mix of safe haven demand and growing expectations that the Federal Reserve will slow its pace of interest rate hikes in the coming months.

 

“Commodity Exchange Inc. gold prices rose for the fifth week in a row, to a fresh nine month high…, amid a softer dollar, poor corporate earnings and heightened layoffs, rising concerns of a recession," Ravindra V. Rao, vice-president head commodity research, Kotak Securities, told Mint.

 

"The yellow metal has been witnessing a one-sided rally since early November, after touching a 28-month low of $1,618 per troy ounce, on signs the Federal Reserve was turning less hawkish, spurring decline in the greenback and U.S. treasury yields. Prospects of a looming slowdown in U.S., cooling inflation and labor market coupled with a Fed pivot might continue to bolster gold prices," he added.

 

Expectations of slower rate hikes have also dented the dollar and U.S. Treasury yields, further benefiting the prices of gold and other non-yielding assets. But markets remain uncertain over where U.S. interest rates will peak, given that inflation is still trending near 40-year highs.

 

Focus this week is also on the Core Personal Consumption Expenditures index, the Federal Reserve’s preferred gauge of inflation. While the index is expected to have eased in December from the prior month, it is still expected to remain well above the Fed’s 2 percent annual target. 

 

Markets are also concerned over the U.S. hitting its debt ceiling limit, with Congress remaining divided over passing an act to raise the ceiling. Treasury Secretary Janet Yellen said in a recent letter to Congress that a potential U.S. default on its debt obligations could wreak havoc in global financial markets. 

 

Such a scenario is also expected to greatly boost safe haven demand for precious metals. Platinum futures rose 0.1 percent, while silver futures jumped 1.4 percent on Monday.

 

 


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