3/11/2024

Gold rally temporarily halted

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Key points:

  • Gold prices took a breather after record growth.
  • The growth was caused by a cooling of the US labor market and statements by the Federal Reserve.
  • Gold could rise in price if inflation data for February is weak.

On March 11, there was a temporary stabilization of gold prices after their rapid growth recorded in previous days. The record rally was triggered by the combined influence of two factors: the weakening labor market in the United States and statements from the Federal Reserve.

As of Monday morning, the spot gold price remained unchanged at $2,177.24 per ounce. US gold futures showed a slight decline of 0.1%, reaching $2,183.90.

“With large speculators adding to net long positions at the fastest weekly pace in 3.5 years last Tuesday, gold is clearly in demand and is not a market for short selling while traders await Fed cuts.”

– commented City Index senior analyst Matt Simpson.

COMEX traders increased their net long positions by 63,018 contracts, bringing their total volume to 131,060 for the week ended March 5, according to information released Friday.

Focus on the consumer price index for February

The key factor that could change price dynamics this week is expected to be the publication of the consumer price index (CPI) for February, which will take place on Tuesday.

Lower-than-forecast CPI readings could encourage an early cut in interest rates, which in turn will support gold prices. Last week, during testimony before Congress, Fed Chairman Powell expressed confidence in the possibility of lowering rates in the coming months.

According to LSEG Interest Rate Probability Data, traders are now forecasting a US rate cut of three to four-quarters of a point (25 basis points), with a 75% chance of a first cut in June.

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