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Strong US Economic Data, Gold Prices Move Sluggish
Strong US Economic Data, Gold Prices Move Sluggish
Wednesday, 22 February 2023

Price Performance Indicators

Product 

Price

% change

GOLDUD

1841.63

-0.65%

GOLDGR

909000

-0.76%

XAUUSD

1842.56

-0.60%

COMEX

1840.4

-0.62%

USD/IDR

15195

-0.11%

Gold focus :

  1. ICDX gold price weakened -0.65% in the week (13/02 - 17/02).
  2. Upbeat US economic data.

Market Review

ICDX gold price weakened by -0.65% compared to the previous week with the dollar index sentiment strengthening 0.57% after a series of US economic data gave rise to market expectations of a tighter policy by the US central bank.

The Bureau of Labor Statistics released the US Consumer Price Index (CPI) rose 0.5% on a monthly basis compared to the previous month which moved at 0.1% speed. On an annual basis, the US CPI increased 6.4%, lower than the previous month's 6.5% increase. Meanwhile, the US Producer Price Index (PPI) moved at 0.7% pace on a monthly basis after contracting -0.2% in the previous month. A rise in monthly consumer and producer price indexes have fueled expectations that the Federal Reserve still has more work to do to tame inflation.

A series of data released showed that the resilience of the US economy was much better than expected. Census Bureau reported US Retail Sales m/m increased by 3% compared to the previous month which decreased -1.1%. The US Department of Labor released US Unemployment Claims fell slightly to 194K from 195K the previous week, indicating labor market conditions are still tight. The housing sector also showed positive data with the US NAHB Housing Market Index was released at level 42, an increase compared to the previous report's 35. The increase in retail sales along with other upbeat data from the labor and housing sectors increased optimism for economic growth while alleviating fears of a recession.

Market View

The Fed's Interest Rate Policy Cues

Gold price movements were influenced by the performance of the US dollar index so that the US central bank's monetary policy tightening strategy as a tool to reduce inflation became a driving sentiment for gold prices. Several Fed officials voiced their views on the continuation of the benchmark interest rate hike. Fed President St. Louis James Bullard said a policy of continued rate hikes could help lock in a disinflationary trend throughout 2023 as well as favoring a 50 basis point rate hike at the upcoming meeting. Richmond Fed President Thomas Barkin agreed the Fed still needs to raise interest rates but can stick with a 25 basis point hike at its next meeting. Managing Director of the International Monetary Fund (IMF) Kristalina Georgieva described the IMF's prospects for 2023 by estimating a slowdown in economic growth and inflation to remain a concern. Georgieva said the IMF expects monetary policy tightening this year but does not project it continue way into 2024.


WEEKLY ECONOMIC DATA & EVENTS CALENDAR

Date

Data / Events

Actual

Expectation

Previous

21-Februari

USD - Flash Services PMI

50.5

47.3

46.8

21-Februari

USD - Flash Manufacturing PMI

47.8

47.4

46.9

21-Februari

USD - Existing Home Sales

4.00M

4.09M

4.03M

23-Februari

USD - FOMC Meeting Minutes

-

-

-

23-Februari

USD - Prelim GDP q/q

-

2.9%

2.9%

23-Februari

USD - Unemployment Claims

-

200K

194K

24-Februari

USD - Core PCE Price Index m/m

-

0.4%

0.3%

24-Februari

USD - New Home Sales

-

620K

616K

24-Februari

USD - Revised UoM Consumer Sentiment

-

66.40

66.40

24-Februari

USD - Revised UoM Inflation Expectations

-

-

4.2%

Source: ICDX Research

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