Is the inflation of the Fed eroding the attraction of Gold?
The Federal Reserve remains a dominant force in the price action of Gold, in which traders closely follow its response to inflation data. The Personal Consumption Expenditures (PCE) Index, the preferred factories of the FED, rose by 0.3%in January, in accordance with expectations. Core PCE, which removes volatile food and energy prices, rose by 2.6% on an annual basis, slightly lower than 2.7% in December.
This data has reinforced the expectations that the FED can delay the reduction of interest rates – an unfavorable scenario for gold. Futures -still praise in a probability of 79% of a rate reduction in June, but policy makers remain careful and do not offer clear signals of imminent relaxation. Higher-langer interest rates reduce the appeal of Gold as a non-ranking active, under pressure from prices lower.
Trade war tensions strengthen the dollar, not gold
This week, rising trade tensions contributed to Gold’s fight, but instead of stimulating the demand for safe port to precious metal, the uncertainty brought investors in the US dollar. President Donald Trump again confirmed that 25% rates on Mexican and Canadian goods will come into effect in March, in addition to an additional 10% duty for Chinese input.
Instead of stimulating the influx of gold, the uncertainty strengthened the dollar while investors were looking for stability. The Dollar Index climbed almost 0.9% this week and hit a highest point in two weeks, making gold more expensive for foreign buyers and weighing on request. Historically, trade conflicts support gold prices, but this time the market preferred cash and the Greenback instead.
Profit and delevering are adding the weakness of Gold?
Gold’s recent rally up to $ 2,956.31, a highest highest, led to a wave of profitable. Analysts at Kitco Metals and Zaner Metals noted that stock market losses caused margin calls, forcing traders to liquidate gold positions. This broad delevering in financial markets added downward pressure to gold, making the withdrawal worse.