Gold price surges as Fed sees inflation declining in long term

Gold is up +0.58%, trading $2029.70 per ounce at the time of writing. The belief among Fed policymakers that inflation will eventually decline has helped to drive up the price of gold by decreasing the opportunity cost of storing non-yielding assets like gold. It is anticipated that the preliminary S&P Global Manufacturing PMI for February will come in above the 50.0 mark for the second consecutive month at 50.5, which might have a negative effect on the price of gold.

The price of gold is still soaring and has risen beyond its four-day high of $2,023, but the upside appears to be constrained by ongoing concerns about the Federal Reserve raising interest rates in the long run due to uncooperative inflation statistics. The US core inflation data is nearly twice as high as the mandated rate of 2%, which dampens expectations that the Fed would lower rates before June.

Interest rates are expected to stay in the range of 5.25%–5.50% until the monetary policy meeting in May, according to traders. The likelihood of a 25 basis point (bps) rate drop is 53% for the June meeting. The longer-term trend in inflation is seen by Fed policymakers as falling, so it might be quite detrimental to focus too much on a single anomaly.

The US Dollar Index is confined in a tight range around 104.20 as investors await the FOMC minutes for the January policy meeting, which will deeply explain the maintenance of interest rates at their current level for the fourth time in a row. In the monetary policy statement, Fed Chair Jerome Powell said a continuation of good data is required to reduce borrowing rates, easing price pressures.

Gold price continues its winning spell for the fourth straight trading session, attempting to deliver a decisive break above the 20 and 50-day Exponential Moving Averages (EMAs), which trade around $2,020. The primary trend in the gold price indicates indecisiveness among market participants due to a Symmetrical Triangle formation on a daily time frame.