Gold edges lower as markets assess Fed outlook

Gold futures (GC=F) fell below the $5,000-an-ounce mark as investors took profits following the previous session’s rally, which had been fueled by softer-than-expected US inflation data.

Bullion dropped by as much as 1.1% after rising 2.4% on Friday. The earlier advance came after January’s US consumer price index showed only a modest increase, easing concerns over a sharper spike in inflation, News.Az reports, citing Bloomberg.

The data strengthened expectations that the Federal Reserve could move toward cutting interest rates. Lower borrowing costs generally support non-yielding assets such as gold, making them more attractive to investors.

Trading activity was relatively subdued during Asian hours, as markets in China remained closed for the Lunar New Year holiday, resulting in thinner liquidity. In recent months, demand for precious metals in China has been particularly strong. This surge prompted authorities in Shenzhen — a key retail trading hub — to issue warnings about “illegal gold-trading activities,” including leveraged trading apps targeting retail investors and online live-stream promotions of bullion sales.

Gold reached a record high above $5,595 in late January amid intense speculative buying that pushed a multiyear rally to extreme levels. However, a sharp two-day selloff at the start of the month drove prices back below $4,500. Since then, bullion has recovered roughly half of those losses, with trading marked by heightened volatility.

Despite the recent pullback, many financial institutions maintain a bullish outlook for gold. Analysts argue that the key factors underpinning the long-term rally remain intact, including ongoing geopolitical tensions, concerns about the Federal Reserve’s independence, and a broader investor shift away from traditional assets such as currencies and sovereign bonds. ANZ Group Holdings Ltd. projected that gold could climb to $5,800 an ounce in the second quarter, echoing similar forecasts from other major banks anticipating further gains.

As of 11:10 a.m. in Singapore, spot gold was down 1% at $4,991.75 an ounce. Silver declined 2.5% to $75.46 an ounce, while platinum and palladium also edged lower. The Bloomberg Dollar Spot Index, which tracks the US currency against major peers, rose 0.1%.

News.Az 

By Nijat Babayev