Price Performance Indicators

Gold focus :

1. ICDX gold prices weakened 0.36% in the week (12/2-16/2).
2. Strong US Inflation data and Mixed Fed comments.

Market Review

The decline in ICDX gold prices to $2,017.75 per Troy Ounce compared to the previous week was influenced by hotter-than-expected US inflation data, along with disappointing US Retail Sales data for January. These factors led market participants to lower their expectations for an early Federal Reserve interest rate cut.

The headline Consumer Price Index (CPI) for the United States recorded a 3.1% increase, surpassing forecasts of 2.9%, albeit slightly lower than the previous reading of 3.4%. Additionally, month-on-month inflation rose to 0.3%, against expectations to maintain the previous figure of 0.2%. The US Core CPI (YoY) remained unchanged at 3.9%, contrary to market expectations of a decline to 3.7% in January. Furthermore, US Core Inflation (MoM) increased by 0.4%, exceeding expectations of an unchanged 0.3% for January. The persistent high inflation in the US has made market participants increasingly pessimistic about the likelihood of an early interest rate cut by The Federal Reserve (The Fed). Fed Vice Chair for Supervision Michael Barr remarked that achieving the path back to 2% inflation in the United States "will probably be difficult."

Adding to the economic indicators, US Retail Sales figures for January experienced a notable contraction of 0.8%, deviating from expectations of a 0.1% increase. Retail Sales, excluding autos, also declined by 0.6%, while investors had anticipated a growth of 0.2%. The weakening Retail Sales data has contributed to a slightly diminished inflation outlook. Despite the Fed maintaining interest rates in the range of 5.25-5.50% for an extended period, inflation remains robust. Fed Bank of Chicago President Austan Goolsbee expressed confidence that inflation is aligning with the central bank's 2% target, although it has remained slightly elevated for several months. Goolsbee emphasized that the interest rate outlook is tied to the Fed's confidence in inflation decreasing to 2%, acknowledging that a prolonged tight monetary policy stance could impact the employment side of the Fed's mandate.

Market View

The Fed's FOMC Meeting Minutes

Looking ahead, market participants are eagerly awaiting the release of the FOMC Meeting Minutes on Thursday morning, anticipating further insights into whether the rate cut will be deferred to May or June 2024. The market is currently pricing in the possibility of four 25 basis point rate cuts by the Federal Reserve in 2024, with the potential commencement from June. This expectation has weighed on the US Dollar and provided support to Gold Prices.

WEEKLY ECONOMIC DATA & EVENTS CALENDAR

Source: ICDX Research