Gold prices close to breaking above $2,050 on US rate hopes

© Reuters.

Investing.com– Gold prices steadied in Asian trade on Friday and were close to breaking above key levels as overnight data spurred hopes that easing inflation will spur interest rate cuts from the Federal Reserve.

Spot prices of the yellow metal were now close to breaking above a $2,000 to $2,050 an ounce trading range established through most of 2024.

But resilience in the dollar limited any further gains in gold, with the greenback rising in overnight trade and retaining most of its strength in the Asian session. 

Spot gold steadied at $2,043.64 an ounce, while gold futures expiring in April fell 0.1% to $2,051.95 an ounce by 00:24 ET (05:24 GMT). Both instruments surged between 0.4% and 0.6% on Thursday, also benefiting from month-end buying after a largely muted performance through February.

Other precious metals also advanced on Friday. Platinum futures rose 0.3% to $885.45 an ounce, while silver futures rose 0.3% to $22.953 an ounce. 

PCE data puts June rate cuts in focus, risks persist 

PCE price index data- the Fed’s preferred inflation gauge- eased as expected in January, data showed on Thursday. The reading spurred hopes that inflation will fall in the coming months and give the Fed enough impetus to cut rates in June.

But the CME Fedwatch tool showed traders only slightly increased their expectations for a rate cut in June, while bets on a hold remained steady.

A slew of Fed officials also warned that sticky inflation will see the central bank in no hurry to begin loosening policy- indicating that any future upside prints in inflation were likely to diminish the prospect of a June cut.

Inflation prints for February and March are now largely expected to determine the trajectory of precious metal prices in the coming months, given that they have moved in line with U.S. rate expectations over the past two years.

Rising rates battered gold over the past two years as the opportunity cost of investing in the yellow metal rose. This notion weighed on most other metals. 

Copper muted after mixed China PMI

Among industrial metals, copper prices fell slightly on Friday following mixed economic signals from top importer China. 

Copper futures expiring in May edged lower to $3.8453 a pound.

Official purchasing managers index data from China showed the country’s manufacturing sector shrank for a fifth straight month in February- a trend that bodes poorly for copper demand.

But non-manufacturing activity was supported by the Lunar New Year holiday, while a private survey showed expansion in the manufacturing sector.