Gold Prices Steady Ahead of Key Inflation Data Next Week

 

Gold Steadies As Investors Await Key Inflation Data

(Bullion News Network)  – Job creation jumped in November, with total job growth surging to 227,000 jobs after a troubling October report. This boosted Wall Street’s betting odds on another 25 bps rate cut from the Federal Reserve, which will meet on December 18th for the final time this year. CME Group’s FedWatch now projects an 85.1% chance that the FOMC will opt to cut rates again when it meets in December. This probability is up from 66% one week ago and could bode well for gold prices, which tend to increase in low-rate environments, heading into mid-December. A weakening dollar also provided a bit of a cushion to gold prices; The reserve currency retreated against other key currencies to end the week. 

The spot price of gold will end the first week of December relatively steady as investors look forward to a set of inflation data reports next week. The CPI and PPI, two core metrics used by the Federal Reserve to gauge inflation, are due next week on Wednesday and Thursday, respectively. These reports should give Wall Street a better idea of what to expect from Fed Chair Jerome Powell’s FOMC. Last month, markets scaled back their bets on another rate cut after a lukewarm jobs report and commentary from Powell, who suggested that the Fed has little reason to be “in a hurry” to cut rates. Projections anticipate a .1% increase to the CPI and year-over-year CPI, as well as no change to the PPI. 

Rate cuts have been a key indicator for the gold market this year. The Fed’s surprise 50 bps rate cut in September pushed gold to its highest price ever, and rate cut speculation has consistently either boosted or quelled gold price action throughout 2024. Growth in the job market helps the Fed’s case for another rate cut. This year, Powell has repeatedly reaffirmed the Fed’s commitment to achieving the Fed’s dual mandate by balancing risks to both consumer prices and employment. Job growth in November suggests a smaller downside risk to employment, but the Fed may need more evidence that inflation is under control before confirming its third rate cut of the year.

Gold prices have been on a tear this year, hitting record after record. Economic uncertainty and geopolitical tensions have been bolstering the traditional safe-haven asset. But also juicing the rally has been surprising demand from China https://t.co/4NjBD1jYEr pic.twitter.com/M991VA2n54

— Bloomberg (@business) December 6, 2024

Geopolitical tension has also been a major driver of gold prices throughout the year. Conflicts in both Europe and the Middle East drove gold to record heights at several points in 2024. Of particular interest to safe haven investors has been a series of escalations between Israel and its regional rivals, including Iran, Lebanon, and Palestine. Last week, the beginning of a ceasefire between Israel and Lebanon drove volatility in the precious metals market. As Syria’s rebels gain ground against Assad’s ruling party in the ongoing Syrian Civil War, analysts expect further developments to impact safe haven asset prices heading into January 2025. 

The gold market will end December’s first week with a sideways trendline as investors brace for two vital inflation reports scheduled for next week. Since the beginning of the year, gold prices are up 27.7%.