Gold prices were on track for a second straight weekly gain on Friday due to improved expectations of interest rate cuts, providing support for silver and platinum, which are up 5.6% and 6.3% respectively this week.
Spot gold rose 0.5 percent to $2,387.85 an ounce. Bullion prices are up 1% so far this week after hitting a one-month high on Thursday.
Signs that inflation may be slowing increase the likelihood of interest rate cuts in the coming months, which tends to support gold and silver prices
On the demand side, expectations of continued strong demand in China received a boost after the country announced more efforts to stabilize the real estate sector hit by the crisis.
Demand in China, which has contributed to rising gold prices in recent months, has become more important as the market waits to see if high gold prices will prompt some central banks to slow purchases and as outflows from financially backed exchange-traded gold funds continue.
Global central banks actively bought gold in 2022-2023, but their largest buyer, China’s central bank, slowed buying in April when spot gold prices reached a record high of $2,431.29.
Independent analyst Ross Norman said: “Central banks these days are more nuanced in their buying behavior and will change the program to be more opportunistic – that is, buying at lows and scaling back highs.”
In the physical market, traders were offering lower insurance premiums in China and bigger discounts in India this week. On the supply side, the 15% increase in the price of gold since the beginning of 2024 keeps profit margins strong for gold miners. According to the World Gold Council, the total global expenditure of gold miners averaged $1,342 per ounce in the last quarter of 2023.
Gold nears second weekly gains on expectations of a rate cut
Expectations of interest rate cuts push gold prices higher Goldprices are poised for a second consecutive weekly gain , supported by increased expectations of a rate cut by the Federal Reserve. U.S. consumer prices rose less than expected in April, boosting hopes of a September rate cut as inflation trended lower. Retail sales data, which showed no growth in April, supports the possibility of monetary easing, suggesting slowing demand. Local .
XAU/USD is trading at USD$2,400.70, up USD 10.16 or +0.43% .
The Consumer Price Index (CPI) rose 0.3% in April, down from 0.4% in the previous two months, suggesting a possible easing of inflationary pressures. The year-on-year CPI rose 3.4% , slightly below the 3.5% increase in March. It is worth noting that the cost of shelter and gasoline contributed significantly to the rise in the CPI, while food prices remained unchanged. The core CPI, excluding food and energy, rose 0.3%. This reflects continued inflation in sectors such as healthcare and personal care .
The impact of economic indicators on market sentiment
Market expectations for a rate cut have increased, with a probability of 73% now for September, up from 69% before the latest data. The Fed’s decision to leave the benchmark interest rate unchanged in the current range of 5.25% to 5.50% underscores the cautious approach amid mixed economic signals. Analysts expect inflation to gradually move towards the Fed’s target of 2%, especially as the labor market shows signs of slowing down .
Analysis of the dynamics of the precious metals market in 2024
Strong retail demand in China and efforts to stabilize the real estate sector have supported gold prices. However, purchases by central banks, particularly China’s central bank, slowed in April as gold prices hit a record high. Supply-side factors, including a 15% increase in gold prices since the start of 2024, have contributed to maintaining good profit margins for gold miners despite high operating costs.
Given favorable conditions for interest rate cuts and continued demand from major markets such as China, gold prices are expected to maintain their upward trend in the near term. While concerns about inflation persist, the prospect of monetary easing provides a bullish outlook for gold, with prices likely to remain high as traders expect more central bank action.
The XAU/USD pair rallied on Friday, immediately supported by a short-term pivot at $2,400.70. The average uptrend is controlled by the 50-day moving average at $2288.35. This is followed by short-term swing bottom support at $2277.34.
If the current bullish momentum continues, look for a rally via the simple resistance at $2397.52. The first major bull targets are the secondary high at $2497.12 and the main high at $2431.59.
Meanwhile, silver and platinum were supported by higher prices of gold and base metals. Spot silver rose 0.5 percent to $29.74 an ounce after hitting its highest level in more than three years and facing a key resistance level at $30 in the previous session..
Platinum lost 0.3% to $1,054.54, after hitting a one-year high on Thursday. The metal has risen 6.3 percent so far this week due to continued structural deficits. Palladium fell 0.8 percent to $985.50, pressured by rising market share of electric vehicles.
