GOLD PRICE JUMPS AS FED SEES PROGRESS IN INFLATION DECLINING TOWARDS 2%
- Gold price extends its recovery in a holiday-shortened week.
- The US PPI rose strongly in January but this was put down to seasonally adjusted fluctuations.
- Fed Bostic sees two rate cuts this year commencing from summer.
Gold price (XAU/USD) continues its winning spell for the third session in a row on Monday despite waning expectations of rate cuts by the Federal Reserve (Fed) before the June monetary policy meeting. The precious metal maintains strength even though sticky Consumer Price Index (CPI) and Producer Price Index (PPI) data for January have prompted prospects of persistent core Personal Consumption Expenditure price index (PCE) data.
Investors believe that the reasoning behind higher Gold price is less significant PPI data for January as prices moved up due to some seasonal adjustment problems. In addition to that, Fed policymakers have considered the surprise rise in the latest consumer price inflation data as a one-time blip, emphasizing the longer trend, which indicates that inflation is moving decisively down.
Meanwhile, the forecast from Atlanta Federal Reserve Bank President Raphael Bostic that progress in underlying measures of inflation could allow the Fed to start reducing interest rates from summer has eased opportunity cost of holding non-yielding assets such as Gold
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