Gold Forecast XAU/USD – Firm Amid Rising Expectations of Easing Consumer Inflation

NEW YORK (Jan 12) Gold futures are edging higher on Thursday shortly before the release of a major U.S. inflation report that could determine the near-term direction of the Federal Reserve’s rate-hike path. Helping to buoy the market is an overnight dip in Treasury yields and a softer U.S. Dollar.

At 11:12 GMT, February Comex gold is trading $1888.50, up $9.60 or +0.51%. On Wednesday, the SPDR Gold Shares ETF (GLD) settled at $174.59, down $0.15 or -0.09%.

U.S. Treasury yields are slightly lower Thursday as investors awaited key inflation data, which could affect upcoming Federal Reserve interest rate policy decisions.

Meanwhile, the U.S. Dollar fell as the Euro and Japanese Yen firmed on expectations that the Fed may be nearing the end of its aggressive monetary policy tightening campaign and that it may not have to raise rates as high as previously feared.

Lower interest rates are good for gold because it lowers the opportunity cost of holding non-yielding bullion. A weaker dollar is also a positive because it tends to make the precious metal more attractive to foreign buyers.

All Eyes on U.S. Consumer Inflation Data

The U.S. consumer price index report is due to be released at 13:30 GMT. Economists polled by Reuters estimate that consumer prices were up 6.5% year-on-year in December, moderating from a 7.1% rise in November. Core consumer inflation is expected to ease to 5.7%.

Demand for gold has been strong since investors started lowering Fed rate hike expectations after last Friday’s data signaled a weakening economy. Prices could push higher if inflation continues to cool in the largest economy in the world.

FXEmpire