Gold rallies as T-yields dip following PCE data

Gold prices surged over 0.50% in the North American session after the release of the Fed’s Core Personal Consumption Expenditure Price Index, which confirmed the continued disinflation trend.

The data supported the fall in US Treasury bond yields, which correlate inversely to precious metals prices. The Core PCE report showed annual figures as expected with inflation decelerating from December’s 2.9% to 2.8% YoY in January. Headline inflation cooled down sharply from 2.6% to 2.4% YoY in January, aligning with the consensus.

Traders are expecting the first Fed’s interest rate cut in June, with odds increasing from 39% a day ago to 50.9% at the time of writing. Other data revealed during the day included Initial Jobless Claims, Pending Home Sales, and the Chicago Purchasing Managers Index (PMI) for February.

Several Federal Reserve speakers have crossed the wires, including Mary Daly, Raphael Bostic, Austan Goolsbee, John Williams, Susan Collins and Michelle Bowman. The US Dollar Index (DXY) edged up by 0.19% at 104.130, while the US 10-year Treasury note yield stands at 4.236%. gold is trading at $2043.55 per ounce at the time of writing.

In U.S. Treasuries, the yield on benchmark U.S. 10-year notes fell 2.6 basis points to 4.248%, from 4.274% late on Wednesday while the 30-year bond yield fell 3.5 basis points to 4.375%. The 2-year note yield, which typically moves in step with interest rate expectations, fell 0.9 basis points to 4.6394%, from 4.648%.