Gold rises to $4,220 as expectations rise ahead of U.S. inflation data
On Friday, global gold markets rallied to $4,220 per ounce, with investors cautiously awaiting the release of crucial US economic data.
Focus on the Fed's favorite inflation indicator
All eyes will be on the September Personal Consumption Expenditures (PCE) report, the US Federal Reserve's favorite measure of inflation, due out later today.
The data is expected to clarify the path of monetary policy, especially with regard to the timing and magnitude of any potential easing of tightening monetary policies.
Signs of a slowing labor market boost interest rate cut hopes
Reports showing a slowdown in the U.S. labor market, with 32,000 private sector jobs lost in November, an unexpected figure, provided a tailwind for gold.
The number of recorded layoffs rose to 71,000, bringing the total number of jobs lost since the beginning of the year to 1.17 million.
These factors have fueled market expectations, which currently stand at an 87% probability that the Fed will cut interest rates at its upcoming meeting next week.
Speculation of a leadership change and support for the yellow metal
In addition to economic indicators, markets are speculating that Kevin Hassett, a former White House economic advisor, could take over as Fed chair from Jerome Powell in May, opening the door to speculation of greater monetary liquidity.
A bright outlook for gold with strong
fundamentals Analysis suggests that gold is likely to continue its strong upward trajectory through 2026, based on several fundamentals:
- Strong demand from investment funds: Gold-linked ETFs are maintaining strong purchases.
- An atmosphere of interest rate cuts: A key positive driver for the non-yielding precious metal, which increases its attractiveness when bond yields fall.
- Hedging demand: Gold continues to be a key safe-haven asset to diversify portfolios and protect them from economic and political volatility.
A combination of expectations of a looser monetary policy, mixed labor data, strong investment and hedging demand, and the Fed's decision next week, followed by a speech by Jerome Powell to clarify the near- and medium-term outlook for gold, seems poised to continue to shine.
