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As the markets process the full inflation data that the United States of America has released, the price of gold fluctuates. For the month-over-month data, the US Consumer Price Index came in at 0.4% vs. 0.4% anticipated. The US CPI for January came in at +6.4% for the year, more than the projected +6.2%.
Fed swaps suggest that as a result, the predicted funds rates in 2023 won’t move significantly. As a result, there has been some softening in the US Dollar, which is assisting in driving up the price of Gold. The price of gold is currently trading at $1,860, in the middle of the day’s range.
On the basis of this information, the market is likely to reduce its expectations for interest rates, which is causing the price of gold to increase. Although bullion is thought of as an inflation hedge, it is very sensitive to rising US interest rates because they raise the opportunity cost of holding the asset with a zero yield.
Markets anticipated the Fed’s target rate to reach a peak of 5.188% in July from its current range of 4.5% to 4.75% prior to the release of the data. In contrast to the near-even odds projected of a higher fed funds rate, Fed funds futures are now pricing in a top-fed funds fund rate of 5.0%–5.25% by July.
