Gold prices to depend on US inflation report

Gold prices were volatile on Monday, fluctuating around the $2,015 per ounce level ahead of Tuesday’s US inflation report. If gold prices increase, resistance may be encountered near $2,065 per ounce, while if gold prices decline, support may be encountered near $2,010 per ounce. 

Gold prices have been predominantly directed by the dollar’s movement, as the competing gold typically loses appeal as an investment when the dollar rises. The dollar remained firm on Monday, with the dollar index hovering around the 104.1 level. US treasury yields edged higher, with the US 10-year bond yielding approximately 4.16%.    

The Fed kept interest rates unchanged at its latest monetary policy meeting within a target range of 5.25% to 5.50%. The Fed, however, has removed the tightening bias from its policy statement, indicating that the central bank is preparing to pivot to a less restrictive monetary policy, boosting gold prices.

This week, markets will be focusing on the US inflation report on the 13th. Headline inflation is expected to drop to 2.9% year-on-year in January from 3.4% in December. The direction of US inflation this week is likely to affect gold prices, as a significant drop in inflation may reignite Fed rate cut expectations, boosting gold prices.

Gold prices are propped up by rising geopolitical tensions, which raise the appeal of safe-haven assets. Concerns that the Geopolitical crisis in the Gaza area may spread to neighboring countries are raising demand for safe-haven assets, boosting gold prices. The war between Israel and Hamas is threatening to spill over the Middle East as tensions rise in the Red Sea area, while the US and the UK have launched a coordinated action against Houthi rebels in Yemen. 

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Written by:
Myrsini Giannouli

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