Daily digest market movers: Gold price shines as speculation over Israel-Hamas ceasefire wane
- Gold price continues its bull run to $2,360 as expectations for Israel and Palestine calling a truce wane. This has resulted in a fresh escalation in geopolitical tensions in the Middle East region.
- Speculation favoring a ceasefire eased sharply after Israeli Prime Minister Benjamin Netanyahu said on Monday that their military is set for an invasion of the Rafah enclave in Gaza, reported Reuters. On the other side, Hamas said the proposal it received for a ceasefire from Israel doesn’t fulfill their demands. The precious metal continues to receive strong bids as geopolitical tensions firm safe-haven demand.
- Going forward, the strength in the Gold price will be tested by the United States consumer price inflation data. The monthly headline and core inflation, which strips off volatile food and energy prices, are both forecasted to have increased at a slower pace of 0.3% from 0.4% in February. In the same period, economists expect the annual headline CPI to accelerate to 3.4% from 3.2%, while the core inflation is anticipated to decelerate to 3.7% from 3.8%.
- Soft inflation figures will amplify expectations for the Federal Reserve reducing interest rates from the June meeting. While hot numbers could force investors to shift rate-cut expectations in the third quarter this year.1
- Currently, traders avoid betting big on Fed rate cuts in June as strong payroll data for March has shifted inflation expectations significantly. A tight labour market tends to lead to higher wage growth, which supports consumer spending and, thus, inflation.
- Due to sticky inflation and robust employment data, some Fed policymakers have said that rate cuts at this point are not appropriate as they could unleash upside risks to price pressures.
- Investors will also focus on the Federal Open Market Committee (FOMC) Minutes of the March meeting, to be published on Wednesday. The Fed kept interest rates unchanged at 5.25%-5.50% and projected three rate cuts by year-end but didn’t provide a specific time frame
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