Gold Prices Surge on Weak US Data
Gold and prices increased on Wednesday following disappointing U.S. retail sales data, which heightened speculation that the world’s largest economy was slowing down. Attention is now directed towards the forthcoming payrolls data for clearer indications. Although there were some gains logged this week, precious metal prices continued to exhibit volatility after their decline from record highs in late January, and have faced challenges in their recovery since then. Recent declines in the dollar, coupled with soft U.S. economic data, provided limited support. Uncertainty surrounding geopolitical tensions in the Middle East has continued to exert pressure on haven-linked demand for gold.
Spot gold increased by 0.6% to $5,052.11 an ounce, whereas gold futures for April climbed 0.9% to $5,076.40 by 01:02. Spot prices have stabilized at approximately $600 per ounce below recent record highs. Spot silver increased by 1.7%, reaching $82.1375 per ounce, while spot platinum saw a rise of 2.1%, climbing to $2,130.63 per ounce. Metals rise as the dollar weakens following disappointing US retail sales figures. On Tuesday, precious metal prices recorded slight declines, but they rebounded on Wednesday following the release of U.S. retail sales data for December, which came in below expectations. Analysts observed that gold’s recent rally faced a setback due to worries that the metal had “run too hard, too fast.” As speculative positioning has largely been cleared from the market, traders are now seeking the next catalyst for a potential upward movement. “Weak economic data in the US prompted some buying,” analysts stated.
Tuesday’s retail sales report revealed that consumer spending in the world’s largest economy is showing signs of cooling, influenced by persistent inflation and pressures in the labor market. A prolonged decline in spending may indicate a less favorable economic forecast. A more subdued economic outlook may prompt the Federal Reserve to consider further interest rate cuts this year to support growth. U.S. Treasury yields declined on this notion, while the dollar faced challenges in regaining ground after significant losses recorded on Monday. The dollar index experienced a decline of 0.2% during Asian trading on Wednesday, continuing the downward trend observed earlier this week. Nonfarm payrolls data, due later on Wednesday, is anticipated to provide clearer insights into the world’s largest economy. Any indications of persistent labor market weakness are expected to increase speculation regarding rate cuts. Reduced borrowing rates generally favor gold and other assets that do not yield returns.
Markets continued to exhibit a general uncertainty regarding U.S. monetary policy, particularly following President Donald Trump’s nomination of Kevin Warsh as the next chairman of the Federal Reserve. Warsh is regarded as a less dovish selection – a perception that has led to significant declines in metal markets since late January. This week, attention will also be directed towards the consumer price index inflation data, which is set to be released on Friday, in addition to the payrolls data. The Federal Reserve’s primary factors for modifying interest rates are the robustness of the labor market and the state of inflation.
