Gold Prices on a Rollercoaster
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Investors witnessed a surprising turn of events as gold prices faced their first weekly downturn since mid-February. This unexpected dip came as expectations of a U.S. interest rate cut waned following reports of slightly higher than anticipated consumer prices in February.
The Consumer Price Index (CPI) revealed a 3.2% increase over the past 12 months through February, marginally up from January’s 3.1%. Notably, this annual spike in consumer prices has decelerated significantly from the peak of 9.1% observed in June 2022. However, the pace of progress has evidently hit a roadblock in recent months.
Analysts are now voicing concerns that gold may have factored in any supportive effects stemming from the anticipation of declining interest rates. Should inflation see an upward surge again, policymakers might find themselves compelled to maintain a more stringent monetary policy stance for an extended period.
Despite the lingering expectations of rate cuts in June, the probability has softened from 72% to 59% post the CPI data release this week, as per the CME FedWatch tool.
Market Movements
The front-month Comex gold for March delivery concluded the week down 1% at $2,157.30 per ounce. Nevertheless, the precious metal has still exhibited a commendable 5.4% increase so far this month and a notable 4.6% uptick year-to-date.
Conversely, the front-month March Comex silver closed the week with a 3.5% boost, reaching $25.20 per ounce, marking its highest settlement value since December 1.
Analysts’ Perspectives
Despite the prevailing uncertainties regarding the short-term valuation of gold, the consensus outlook remains optimistic for the precious metal’s long-term trajectory. Goldman Sachs has revised its 2024 average gold price forecast to $2,180 per ounce from $2,090, along with an expected year-end surge to $2,300 per ounce.
Moreover, ING analysts have revised their gold outlook, forecasting Q4 prices to average $2,150 per ounce. They anticipate gold prices to continue on an upward trajectory throughout the year, fueled by sustained safe-haven demand amidst geopolitical conflicts and the looming U.S. elections, injecting a dose of uncertainty into the market.
John Reade, the chief market strategist at World Gold Council Reade, highlighted the potential impact of eurodollar weakness on gold prices in an interview with The Wall Street Journal, suggesting that this factor is currently bolstering the stability of gold.
