The international gold price has risen once more, supported by two positive factors, and FED officials emphasize flexibility
On Thursday (January 12), with the help of the pressure on the U.S. index, international gold prices rose once more, and market participants waited for the upcoming key U.S. inflation data, which may affect the Fed’s monetary policy path. Increases in gold reserves in some countries have also helped push up prices.
At 15:28 Beijing time, spot gold rose 0.32% to $1,881.06 an ounce; the main COMEX gold futures contract rose 0.28% to $1,884.3 an ounce; the U.S. dollar index fell 0.04% to 103.189.
The focus of investors’ attention is still on the US consumer price index for December, which will be released at 21:30 Beijing time on Thursday. The market generally expects a decline in the U.S. December inflation data, which may force the Federal Reserve to revise its monetary policy expectations for 2023 and beyond.
Ajay Kedia, director of Kedia Commodities in Mumbai, said: “With the dollar weakening, gold prices are well supported. However, from a technical point of view, gold prices have encountered some resistance around $1,880, so it has been range-bound for a few days. If the inflation report Supporting gold, then gold might go up to $1,900, but then there will be some profit-taking.”
According to the “New York Times” report on Wednesday (January 11), Boston Fed President Collins said that she is inclined to raise interest rates by 25 basis points at the central bank’s upcoming policy meeting. This is expected to mark a return to normal rhythm of monetary policy adjustment.
“I think 25 or 50 basis points is reasonable,” Collins said in an interview. “I’m leaning towards 25 basis points at this stage, but it has to be very data-dependent. Slow policy adjustments give us more time to make decisions on each basis.” Assessing the data we receive before making a decision, smaller rate changes give us more flexibility.”
The Fed cut its rate hike to 50 basis points in December following raising rates four times in a row to 75 basis points last year. Although gold is considered an inflation hedge, rising interest rates increase the opportunity cost of owning bullion.
Increases in gold reserves in some countries have also helped push up prices. Efforts to increase gold reserves have become easier in recent months as the dollar has weakened, making it cheaper for countries outside the United States to buy gold.
Gold tends to do well in times of crisis, and the risk of a global recession this year might be a factor attracting investors, said Krishan Gopaul, senior market analyst for Europe, the Middle East and Africa at the World Gold Council.
Craig Erlam, senior market analyst at OANDA, echoed this view: “The global economy is facing a severe slowdown this year, with many countries in recession, which may make gold more attractive.”
