Gold Surges as Traders Prepare for Make-or-Break Inflation Report

TLDR

• Gold prices increased Friday morning with futures up 0.8% to $4,990 per ounce as markets awaited January CPI inflation data release at 8:30am ET
• Spot gold climbed 1.1% to $4,973.49 per ounce recovering from Thursday’s 3% decline during previous trading session
• Deutsche Bank predicts January monthly CPI at 0.26% down from December’s 0.31% with annual inflation rate falling to 2.5%
• US dollar index strengthened 0.2% to 97.05 while pound sterling held steady at $1.3617 ahead of key economic data
• Reports of second US aircraft carrier deployment to Middle East boosted safe haven demand for precious metals

Gold prices moved higher on Friday as investors positioned themselves ahead of critical US inflation data. The precious metal recovered from steep losses recorded in the previous trading session.

Gold futures for April delivery rose 0.8% to reach $4,990 per ounce. Spot gold prices gained 1.1% to trade at $4,973.49 per ounce during Friday morning hours.

The US Bureau of Labor Statistics was set to publish January consumer price index figures at 8:30am Eastern Time. This data release has major implications for Federal Reserve monetary policy decisions.

Thursday’s trading session saw spot gold plummet more than 3%. Friday’s gains represented a strong recovery from those losses.

Silver and platinum also posted gains on Friday. Spot silver surged 4% to $78.703 per ounce after dropping approximately 10% the day before. Spot platinum increased 0.6% to $2,034.65 per ounce, climbing back above the $2,000 level.

Currency Markets React to Inflation Data Expectations

The British pound remained stable against the US dollar on Friday morning. Sterling traded at $1.3617 as currency traders awaited the inflation numbers.

The US dollar index gained strength before the data release. The index, which measures the greenback against six major currencies, advanced 0.2% to 97.05.

Deutsche Bank released their inflation forecasts for January. Their economists expect monthly CPI to register 0.26%, a decrease from December’s 0.31% figure.

The bank predicts annual inflation will drop to 2.5% for the year-over-year comparison. Analysts noted that falling motor fuel prices should pull headline inflation lower by approximately 2.4%.

Core CPI is expected to show more strength at 0.35% monthly. Deutsche Bank economists are monitoring tariff-related price increases in categories including household goods and clothing.

Federal Reserve Policy and Safe Haven Demand

ING’s FX strategist Francesco Pesole suggested Friday’s CPI report would create less market volatility than Wednesday’s jobs data. The Federal Reserve has communicated limited urgency for additional rate cuts.

ING’s inflation forecast matches market consensus. The firm projects 0.3% monthly growth and 2.5% annual growth for both core and headline CPI measures.

Safe haven buying supported gold prices on Friday. Multiple news sources reported the US government plans to send a second aircraft carrier to the Middle East region.

The USS Gerald R. Ford is reportedly being deployed as diplomatic efforts with Iran show signs of failure. Nuclear negotiations between the nations have stalled.

ANZ analysts explained that unexpected inflation increases could discourage Federal Reserve rate cuts. Higher borrowing costs typically reduce investor appetite for non-yielding assets like gold.

Wednesday’s employment report showed stronger-than-expected job growth for January. The nonfarm payrolls data has already reduced market expectations for aggressive Fed rate reductions.

Gold and other precious metals have experienced volatility since late January’s flash crash event. Interest rate uncertainty continues to weigh on precious metals markets.

The post Gold Surges as Traders Prepare for Make-or-Break Inflation Report appeared first on Blockonomi.