- Gold price edges higher to $2,014 amid the USD weakness.
- The US Producer Price Index (PPI) rose 0.3% MoM in January versus a 0.1% decline prior, the largest increase since August 2023.
- The ongoing geopolitical tensions in the Middle East might boost safe-haven flows and the gold price.
- Traders will focus on the People's Bank of China's (PBOC) interest rate decision and the FOMC Minutes.
Gold price (XAU/USD) holds above $2,000 during the early Asian session on Monday. US economic data suggests inflation is stickier than expected and prompted financial markets to dial back expectations that the Federal Reserve (Fed) would start cutting interest rates in June. At press time, the gold price is trading at $2,014, gaining 0.12% on the day.
The Producer Price Index (PPI) for final demand rose 0.3% MoM in January from a 0.1% decline in December, the largest increase since August 2023. On an annual basis, the PPI figure climbed 0.9% YoY from a 1.0% rise in the previous reading. Meanwhile, US Housing Starts fell -14.8% from 1.562M to 1.331M, while Building Permits slumped -1.5%.
The markets anticipate the Fed to cut the interest rate this year, though the odds of a move in June are diminishing. The delay in interest rate cuts might weigh on the yellow gold. It’s worth noting that the high interest rate diminishes the appeal of non-yielding metals as it increases competition from higher-yielding investments.
The People's Bank of China (PBOC) will announce the interest rate decision on Tuesday, with no change in policy expected. Investors will also monitor the developments surrounding the additional stimulus measures from Chinese authorities in the coming months.
Additionally, Hezbollah claimed to be acting in solidarity with its Gaza allies, Hamas and will continue to attack as long as Israel bombards the embattled Palestinian enclave. The rising geopolitical tensions in the Middle East might lift gold prices, a traditional safe-haven asset.
Moving on, market participants await the PBoC Interest Rate Decision on Tuesday. The FOMC Minutes will be released on Wednesday and will be a closely watched event. Traders will take cues from the data and find trading opportunities around the gold price.
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