Slight rise in gold prices amid anticipation of economic data and geopolitical tensions
Gold prices rose slightly on Friday, with the precious metal continuing to trade above $5,000 an ounce, extending its gains for the third consecutive session, amid market anticipation of geopolitical developments and US monetary policy decisions.
Tensions between the US and Iran support gold
Gold was supported by escalating tensions between the US and Iran, after President Donald Trump gave a 10- to 15-day deadline to reach an agreement on the nuclear issue.
Washington also reinforced its military presence in the Middle East, in the largest deployment since 2003, raising concerns about the possibility of a military escalation and prompting investors to strengthen their positions in safe-haven assets,
particularly gold. These developments also contributed to higher crude oil prices, which increased gold's appeal as a hedge against inflation, despite weak actual demand in Asian markets during the Lunar New Year period.
Monetary policy puts pressure on gold gains
On the other hand, monetary policy expectations limited the strength of gold's rise, after Federal Reserve Board member Steven Muran indicated that interest rate cuts this year may be less likely given stronger-than-expected economic data.
This trend was supported by a decline in initial jobless claims to 206,000 last week, reflecting the continued strength of the US labor market and giving the Fed room to keep interest rates high for longer.
The minutes of the Federal Open Market Committee's January meeting also showed a clear divide among monetary policymakers, with some not ruling out the possibility of another rate hike if inflationary pressures persist.
Markets await GDP and PCE data
Investors are now turning their attention to the release of gross domestic product (GDP) data, as well as the personal consumption expenditure (PCE) index, which is the Fed's preferred measure of inflation.
This data will determine the direction of gold prices in the coming period, especially given the precious metal's sensitivity to any changes in US interest rate expectations.
