- The dollar index is expected to post its first weekly decline since January.
- The number of Americans making new unemployment claims dropped once more last week.
- Investors were betting on increased physical demand from China, the largest bullion consumer.
Gold is set to post its most significant weekly increase since mid-January as the US dollar declined despite the prospect of further Federal Reserve rate hikes. The dollar index is also expected to record its first weekly decline since January, making gold more affordable to purchasers using other currencies.
Wednesday saw a 1% increase in gold prices as the dollar suffered from solid Chinese economic statistics. Investors were betting on increased physical demand from the largest bullion consumer. Nevertheless, gains were constrained by the possibility of rising US interest rates.
In February, bullion saw its worst month since June 2021 due to strong US economic data. There was fear that the Federal Reserve could continue raising interest rates to combat inflation.
Thursday saw a slight decline as investors wavered between an expected higher demand coming from China, combined with the concerns of recessionary issues in the US and abroad.
Raphael Bostic, president of the Atlanta Fed, warned on Thursday that the effect of higher US interest rates on the economy might not “bite” in full until this spring, which is a justification for the Fed to continue with “steady” quarter-point rate rises.
The number of Americans making new unemployment claims dropped once more last week, fueling concerns that the Fed would continue raising interest rates for longer. However, the dollar’s weakness supported gold prices.
A different report released on Thursday revealed that fourth-quarter labor costs increased more quickly than anticipated.
Gold may be in for a difficult week’s conclusion if Fedspeak confirms that interest rates could rise even further.
The money markets, which believe that the Fed’s target rate will reach its highest level of 5.453% in September, have practically priced out the possibility of rate reductions this year.
On the supply side, Peter Steenkamp, CEO of Harmony Gold, said mergers and acquisitions in the gold mining industry are unavoidable because dwindling mineral reserves must be replaced.
In an interview with Reuters, Steenkamp stated that it would be unavoidable that there would be some sort of consolidation since exploration has been lacking for such a long time. For people to replace assets, they will have to look at what their neighbors have and what the opportunities will be.