Macro

Gold Nears $2,356, Awaits US CPI for Fed Rate Clues

Gold steadies near $2,356 as market awaits US CPI data, hinting at potential Fed rate cuts amidst softening labor market signs.

By Athena Xu

5/15, 03:39 EDT
S&P 500
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Key Takeaway

  • Gold steadies near $2,356 an ounce before US inflation data that could influence Federal Reserve rate decisions.
  • Anticipation of moderated April inflation strengthens the case for potential rate cuts, benefiting non-interest-bearing assets like gold.
  • Platinum surges 5% this week on revised deficit forecasts by the World Platinum Investment Council, highlighting a drop in mine supply.

Gold Awaits Inflation Data

Gold steadied after a near 1% rise on Tuesday, with the market's eyes set on the upcoming US inflation data. The core consumer price index (CPI), expected to be released on Wednesday, is forecasted to show a moderation in underlying inflation for the first time in six months. This anticipation has bolstered the case for potential rate cuts within the year, a scenario typically favorable for gold, which thrives in low-interest rate environments due to its non-yielding nature. Currently, gold is trading near $2,356 an ounce, reflecting the market's cautious optimism.

Treasuries and Rate Cut Expectations

The bond market has seen an uptick, with Treasuries advancing as traders brace for the inflation data that could influence the Federal Reserve's rate decisions. The yield on two-year Treasuries has notably decreased, indicating a market pricing in at least one quarter-point rate cut by the Fed, likely in September, with a 62% chance of a second cut. This shift in expectations comes amidst signs of a softening labor market, which could lead to easing inflation and, consequently, a more dovish stance from the Fed.

Platinum Surges on Deficit Forecasts

Platinum prices have jumped, with a 5% increase this week alone, following the World Platinum Investment Council's report forecasting a larger deficit of 476,000 ounces for the year. The report attributes the deficit to a 3% fall in mine supply, highlighting the ongoing supply constraints in the platinum market. This surge in platinum prices is part of a broader trend in precious metals, where geopolitical risks and central bank buying have supported prices.