Gold prices continue their upward trajectory for the third consecutive session on Monday, signaling a shift in investor sentiment amidst ongoing economic and geopolitical uncertainties.
Spot gold witnessed a 0.32 percent increase recording $2,019.98 per ounce, as of 08:50 GMT. Meanwhile, U.S. gold futures saw a 0.33 percent increase recording $2,030.75 per ounce.
In Saudi Arabia, the current price of gold is SAR7,575.17 per ounce.
Market trends
The recent rise in gold prices is attributed to a combination of factors, including a weakening U.S. dollar and escalating tensions in the Middle East. Concerns surrounding political stability and potential oil supply disruptions bolster gold’s appeal as a safe-haven asset, driving investor interest despite previous downturns.
Economic data impact
Recent U.S. economic data releases, such as the consumer price index (CPI), producer price index (PPI), and retail sales figures, significantly influence gold prices. The recent PPI for final demand rose 0.3 percent month-on-month in January from a 0.1 percent decline in December. That is the largest increase since August 2023. Year-on-year, the PPI increased 0.9 percent from a 1.0 percent rise in the previous reading.
These indicators shape investor expectations regarding monetary policy and interest rates, with inflation data particularly driving investors towards gold as a hedge against currency devaluation.
Moreover, the financial markets are expecting the Federal Reserve to lower interest rates later this year, although the likelihood of this happening in June is decreasing. The postponement of interest rate cuts could negatively impact gold prices. Thus, higher interest rates make non-interest-bearing metals less attractive, as they face stronger competition from investments offering higher yields.
Read: How to invest in Saudi share market
Short-term forecast
The short-term outlook for gold appears bullish, with its value expected to respond to inflation concerns, dollar performance, and Federal Reserve policy decisions. The market will closely monitor key upcoming economic reports and Fed statements, particularly regarding inflation and interest rate policies. Hence, market sensitivity to these developments underscores the importance of staying alert to gauge future movements in gold prices.
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