Gold Price Slides Near $2,027 on Strong US Data and China Interest Rate Decision
The gold price (XAU/USD) has experienced a decline, reaching $2,027 during the early Asian session on Monday. This drop can be attributed to robust US economic data, which has raised expectations that the Federal Reserve (Fed) may delay interest rate cuts. As a result, the US Dollar (USD) has gained strength, putting pressure on the price of gold.
Investors are closely watching the US Core Personal Consumption Expenditures Price Index (Core PCE) for December, which is set to be released on Friday. This data has the potential to cause volatility in the market and further impact the gold price. Additionally, the University of Michigan’s preliminary reading on the consumer sentiment index for January revealed an improvement, reaching its highest level since July 2021. This positive consumer sentiment suggests a stronger economy, which could influence the Fed’s decision on interest rates.
San Francisco Federal Reserve Bank President Mary Daly recently stated that there is still work to be done in bringing inflation back down to the Fed’s target of 2%. She emphasized that it is premature to consider interest rate cuts at this time. However, two significant events this week could sway central bank policymakers’ stance on policy. The US GDP growth numbers will be released on Thursday, followed by the Core PCE on Friday. If these indicators show weaker data, it is likely to push the Fed towards a more dovish approach, potentially limiting the downside of the gold price.
In addition to US data, investors are also awaiting the interest rate decision from the People’s Bank of China on Monday. It is expected that China will leave the benchmark one- and five-year loan prime rates (LPR) unchanged at 3.45% and 4.20%, respectively. However, there is growing bearish sentiment towards China as recent economic data suggests that the country’s economy is still struggling. Any negative developments in China could further weigh down the gold price, as China is one of the largest consumers of gold globally.
Overall, the gold price has faced downward pressure due to strong US economic data and the anticipation of the Fed delaying interest rate cuts. The upcoming US GDP growth numbers and Core PCE data will provide further insight into the Fed’s monetary policy direction. Additionally, the People’s Bank of China’s interest rate decision will influence market sentiment towards gold. Investors will be closely monitoring these events to gauge the future trajectory of the gold price.
