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Gold hovers above $1,900 for first time in 8 months on Fed rate prospects
Gold prices rose in European trade for the second session, trading above $1,900 an ounce for the first time in eight months and heading for the fourth weekly profit in a row as chances of a 0.5% rate hike are all but ruled out.
The greenback tumbled to seven-month lows on track to mark even more losses following major US inflation data, which showed prices down to 14-month lows, reducing pressure on the Fed.
Gold Prices
Gold prices rose 0.7% to $1,909 an ounce, after rising 1.1% yesterday as the dollar tumbled following major US inflation data.
Gold prices are up 2.3% so far this week, on track for the fourth weekly profit in a row amid fresh pricing for Fed rates.
The Dollar
The dollar index fell 0.2% on Friday , plumbing seven-month lows at 102.05 against a basket of major rivals.
It comes after recent inflation data showed consumer prices tapered off to 14-month lows, marking the sixth monthly drop in a row, reducing pressure on the Fed.
Such data boosted the odds of a 0.25% Fed rate hike in February to 95%, with only a 5% chance of a 0.5% rate hike.
Fed Remarks
Fed Philadelphia President Patrick Harker said while the Fed needs to hike rates to control inflation, it's expected to do so in a slower pace, with 0.25% hikes becoming more appropriate.
The SPDR
Gold holdings at the SPDR Gold Trust fell 0.29 tones yesterday, the third decline in a row, to a total of 912.14 tones, the lowest since December 19.
Euro extends gains to nine-month highs on policy diversion
Euro rose in European trade against dollar for the sixth straight session, hitting nine-month highs and on track for the largest weekly profit since November as concerns about policy gaps between the US and Europe fade.
The ECB is expected to hike interest rates by 50 basis points in February, while the Fed is now expected to increase interest rates by only 0.25%, as US inflation slowed down for the sixth straight month.
EUR/USD rose 0.2% to 1.0868, the highest since April 2022, after rising 0.9% on Monday, the fifth profit in a row as US consumer prices drop.
Euro remains up 2.1% this week against dollar, on track for the largest weekly profit since early November.
Economic Risks
Natural gas prices fell in Europe amid a warmer climate than expected, which brought stronger wind and helped wind turbines generate more renewable energy.
China as well reopened its borders and continued to ease Covid 19 restrictions, which bolsters trade once more with Europe.
As risks become reduced on the European economy, most analysts now expect the ECB to continue hiking rates by 50 basis points at upcoming meetings to control inflation.
The Dollar
The dollar index fell 0.2% on Friday , plumbing seven-month lows at 102.05 against a basket of major rivals.
It comes after recent inflation data showed consumer prices tapered off to 14-month lows, marking the sixth monthly drop in a row, reducing pressure on the Fed.
Such data boosted the odds of a 0.25% Fed rate hike in February to 95%, with only a 5% chance of a 0.5% rate hike.
Gold climbs over 1% past $1,900 an ounce
Gold prices rose on Thursday past $1,900 an ounce as the dollar index lost ground and following inflation data.
Recent US data showed consumer prices rose 6.5% in December y/y, the slowest since October 2021, and down from 7.1% in the previous reading.
US consumer prices actually fell 0.1% in December m/m, the worst such reading since May 2020, and matching estimates, and compared to November's 0.1% increase.
US unemployment claims fell to 205 thousand in the week ending January 7, the lowest since January, and below 206 thousand in the previous reading, while also below estimates of 216 thousand.
The dollar index fell 1.1% as of 18:08 GMT to 102.09, with a session-high at 103.2, and a low at 102.08.
Gold spot prices rose 1.2%, or $23 to $1,901.8 an ounce as of 18:09 GMT.
Dow Jones rises after inflation data
US stock indices were mixed on Thursday as investors process latest US inflation data.
Recent US data showed consumer prices rose 6.5% in December y/y, the slowest since October 2021, and down from 7.1% in the previous reading.
US consumer prices actually fell 0.1% in December m/m, the worst such reading since May 2020, and matching estimates, and compared to November's 0.1% increase.
US unemployment claims fell to 205 thousand in the week ending January 7, the lowest since January, and below 206 thousand in the previous reading, while also below estimates of 216 thousand.
Dow Jones rose 0.2%, or 70 points as of 15:50 GMT to 340,042, while S&P 500 fell 0.1%, or 5 points to 3,964, as NASDAQ gave up 0.3%, or 31 points to 10,899.