Jakarta, CNBC Indonesia – The price of gold flew after the United States (US) inflation data moved according to market expectations. In trading on Friday (13/1/2023) at 06:12 WIB, the world gold price on the spot market was at US$ 1,896.45 per troy ounce. The price slightly weakened 0.02%.
Despite weakening on Friday morning today, gold is still at its highest level since April 2022 as it flew the previous day.
On Thursday trading (12/1/2023), gold closed up 1.1% at US$ 1,896.86 per troy ounce. This price is the highest since April 26 2022 or nearly the last nine months.
The price of gold is still strengthening 1.6% on a regular basis point to point in a week. The price of gold also jumped 4.8% while in a year it rose 4.1%.
Gold prices took flight after the US announced their inflation data for December 2022. The US Department of Labor reports US inflation has fallen to 6.5% (year on year/yoy) in December 2022 from 7.1% (yoy) in November 2022. The inflation was the lowest since October 2021.
On a monthly basis (month to month/mtm), the US even recorded a deflation of 0.1% in December. This deflation is the first time it has occurred since May 2020.
The movement of inflation in December 2022 is in line with market expectations which predict inflation to be in the range of 6.4-6.5%.
The decline in inflation is of course positive news for gold market players. With inflation continuing to decline, the US central bank The Federal Reserve (The Fed) could further loosen their monetary policy.
This sluggish inflation dragged down the US dollar index. The index fell to 102.25 yesterday or its lowest since four months ago. Yield government bonds with a tenor of 10 years also slumped to 3.56%, lower than the previous day’s closing at 3.62%.
These two factors really support the price of gold. The weakening US dollar makes gold prices cheaper making it affordable for investment. Gold also does not offer yields so it is sloping yield will benefit gold.
“The weakening of the US dollar and the yield of US government bonds boosted the price of gold because these two factors greatly determine the price of gold,” said Standard Chartered analyst Suki Cooper, quoted from Reuters.
ING economist James Knightley said inflation has slowed down so much that there is room for the Fed to raise interest rates by just 25 bps in February 2023.
If interest rate hikes are more moderate then the price of gold can fly even more.
For the record, the price of gold has strengthened by US$ 267 per troy ounce or 16.4% since early November 2022 or since the last time the Fed raised interest rates aggressively by 75 bps.
CNBC INDONESIA RESEARCH TEAM
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