Lagos — Gold ended last week down near $2,858 per ounce as economic data indicated a complex inflation situation and the strength of the U.S. dollar was reinforced by market expectations that the Fed would maintain its hawkish stance.
Last Friday, gold officially ended an eight-week winning streak. On the same day, the market observed the core PCE Price Index (Jan) data, which came in at 0.3% MoM and 2.6% YoY. While the monthly data showed an increase compared to the previous period, the yearly data declined slightly. However, these figures were not enough for the market to expect the Fed to change its current firm stance.
The U.S. dollar index rose 0.94% last week to 107.55. Combined with little change in inflation signals, this could be a driving force for the USD to continue its three-day rally, which could further pressure gold prices.
On another note, last Friday, the market was anticipating a positive outcome from the meeting between the U.S. and Ukrainian presidents. If a mineral agreement had been signed, it would have boosted investor confidence in the prospect of restored peace between Russia and Ukraine. In that case, safe-haven assets like gold would no longer be a top priority.
However, the Oval Office meeting ended in tension, as both presidents failed to reach a mutual agreement. Market concerns resurfaced regarding a potential breakdown in U.S.-Ukraine relations, which could slow the Russia-Ukraine peace process. As a result, gold prices rebounded at the end of the session.
Kitco News conducted a survey with 14 analysts regarding this week’s gold prices. Only three experts (21%) expect gold prices to rise, while nine analysts (64%) predict the precious metal will decline. The remaining two analysts, accounting for 14%, forecast gold prices to remain flat this week.
More cautiously, investors need to pay attention to the potential for gold’s bullish momentum to return. The combination of an unoptimistic economic outlook, an expanding trade war, and the potential for renewed tensions between Russia, the U.S., and Ukraine after last Friday creates an ideal environment for gold, as it serves as a hedge against economic and geopolitical instability.
Looking ahead, this week’s focus will be on U.S. Non-Farm Payroll and employment data. These figures could impact short-term market trends.
*Linh Tran, Market Analyst at XS.com
