Gold Trading Alert: Gold prices are under slight pressure, traders are worried about U.S. inflation picking up

At the beginning of the Asian market on Tuesday (February 27), spot gold fluctuated within a narrow range and is currently trading around $2,030.75 per ounce. The price of gold (2042.01, 3.11, 0.15%) fluctuated slightly on Monday (February 26), with spot gold closing down 0.23% at $2,030.95 per ounce. The market focus turned to the U.S. inflation data to be released this week, and some traders were worried about the U.S. Inflation is picking up, which could affect the Fed's rate cut schedule.

The U.S. personal consumption expenditures (PCE) price index will be released on Thursday and is expected to rise 0.4% month-on-month, which is the inflation measure favored by the Federal Reserve.

Kitco Metal senior analyst Jim Wyckoff said: "If the PCE price index data is higher than expected, it will be negative for precious metals, but gold prices will remain in the $2,000 range. To fall below $2,000, this week's economic data must surprise overheat."

Wyckoff added that the gold and silver markets are facing some technical selling pressure due to the lack of new fundamental news, and the market is still waiting for new data points.

Recent comments from Fed officials have suggested the central bank is in no rush to cut interest rates, largely solidifying bets that there will be no rate cuts before June. Higher interest rates make non-yielding gold less attractive.

CME "Fed Watch": The probability that the Federal Reserve will keep interest rates unchanged in the range of 5.25%-5.50% in March is 97.5%, and the probability of cutting interest rates by 25 basis points is 2.5%. The probability of keeping interest rates unchanged by May is 85.0%, the probability of a cumulative 25 basis point interest rate cut is 14.6%, and the probability of a cumulative 50 basis point interest rate cut is 0.3%.

【Market News Analysis】

Market sentiment remains mixed, but with a slight negative bias in favor of the dollar.

Interest rate speculators have ruled out rate cuts by the Federal Reserve in March and May. There is a 50% chance of a quarter-percentage point rate cut in June. Gold remains under pressure as investors remain in lockstep.

Although gold prices have shown amazing resilience recently, there is not much room for further gains. Macquarie analysts pointed out in a research report that market expectations for the Federal Reserve's interest rate cut in March were significantly too high at the beginning of this year, but with federal funds futures currently pricing in three to four rate cuts of 25 basis points each starting in June, Risks have become more balanced. Macquarie said gold’s recent performance has been impressive and the main reason for its outperformance is likely to be strong physical demand, but given the inverse relationship between prices and changes in physical demand, this is unlikely to be a factor in the short term. raise prices within. Instead, the macro-financial backdrop will be more favorable later this year, driving gold prices to new highs.

The sharp swings in gold prices were also tied to the dollar, which attempted to rebound as investors turned their attention to U.S. core personal consumption expenditures price index data for January. The Fed's preferred inflation measure will be released on Thursday, which could affect market expectations for a rate cut.

Gold remains trading above $2,000 an ounce despite waning interest rate cut expectations. Economists at ANZ analyze the outlook for gold. They pointed out that “January’s core inflation data was higher than expected, dimming the prospect of a sharp early interest rate cut by the Federal Reserve. In early January, the market expected a 150 basis point interest rate cut starting in March, but this expectation has been postponed to June and reduced to 70-80 basis points. Confirmation of the timing and intensity of rate cuts should guide gold prices. Central banks bought 30 tonnes of gold in December, lifting official purchases to 1,037 tonnes in 2023. Gold spot premiums in China and India indicate physical demand healthy."