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Gold price triggered another bearish run after FOMC Minutes showed a hawkish stance by Fed officials. The US dollar stays dominant across the board despite US Gross Domestic Product disappointing on the second estimate for Q4 2022.
Gold price keeps trending lower on Thursday after a bearish Wednesday, where the precious metal was weighed down by the minutes. The precious metal is trading at $1,824.10 at the time of writing. The US Dollar made gains across the board, and the Gold Index (XAU/USD) closed below what had been thick support at $1,830 for the first time since January 3.
Market eyes will turn now to Friday’s US Personal Consumption Expenditures (PCE) Price Index release, the Fed’s preferred measure of inflation.
US Gross Domestic Product (GDP) second estimate for the last quarter of 2022 was reduced to 2.7%, from the 2.9% growth shown in the preliminary print. Markets mostly seem to have ignored the figure, though, and will await for further Federal Reserve clues from Raphael Bostic, the President of the Atlanta Fed branch, later in the day.
More important is the economic data to come out on Friday. The US Bureau of Economic Analysis (BEA) will publish the PCE Price Index, the Fed’s preferred gauge of inflation, at 13:30 GMT on Friday.
Gold traders and investors will watch the data release closely, as Core PCE inflation is forecast to rise by 0.4% on a monthly basis but the annual figure is expected to decline to 4.1% in January from 4.4% in December. The market reaction should be straightforward, with a softer-than-expected monthly PCE inflation weighing on the US Dollar and vice versa, with gold price reacting the opposite way.
Considering that the CPI report already revealed that inflation remained sticky in January, it would be surprising to see this data have a long-lasting impact on markets.
Gold price is no stranger to Fed’s monetary policy decisions. The US central bank has been on an interest rate-hiking quest since March 2022, raising the main policy rate from 0.25% to 4.75% in February 2023 to combat super-high inflation numbers. The US Dollar has been the greatest beneficiary of this move, as traders put a premium on the world’s reserve currency when cash became more costly to obtain. This dynamic generates, in turn, a depreciation in assets valued in US Dollar terms like gold.
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