Gold prices rallied limitedly in the trading session on Monday (27/February) night. Spot gold rose by 0.5% to $1818.89 an ounce, and gold futures prices climbed by an equal percentage to a range of $1825.70.
The XAU/USD chart shows a 0.33% gain at $1815.78 in the market. Fed rate hikes remain the biggest scourge for further price hikes for this precious metal.
But for now, the pace of decline has been halted by the United States Dollar Index weakening as much as 0.4% from its seven-week peak. Gold has already reached support around $1806.
However, This commodity is still buoyed by higher-than-expected inflation and stronger economic data. This was commented by Bart Melek, an analyst at TD Securities.
Gold can be Sensitive for Some Factors
The United States economic data late last week showed that Consumer Spending increased at its highest level for nearly 2 years. The data comes amid accelerating US inflation.
This was adding to gold traders' concerns that the Fed will raise their interest rates. Given how the Fed assesses accelerated inflation in January, market interest in gold as a zero-yielding asset will likely shrink.
It is as interest rates rise in the near term. This is what drags the price down. This opinion was stated by Lukman Otunuga, an FXTM analyst.
The analyst added that gold will still be very sensitive to the statements of Fed officials, core economic data and any inflation-related topics ahead of the turn of the month.
More Efforts Needed to Push Inflation
The Cleveland Fed President, Loretta Mester, highlighted the Fed's efforts to return inflation to its 2% target. This requires more effort from the Fed for inflation to fall sustainably towards 2%.
Last Saturday, the American Treasury Secretary, Janet Yellen, told Reuters that an unexpected spike in January of inflation was a signal that efforts to tackle inflation were not a "straight-line" or a specially allocated policy.
That is why; some further efforts still need to be made. Elsewhere, The United States dollar index (DXY) slumped from its two-month high record of 105.35 to a low level of 104.54.
It was seen in the early phase of Monday's New York session. Market expectations for the Fed's interest rate outlook remain high, but the greenback corrects amid a mix of factors such as mixed DGO data and improved global sentiment.
DGO Showed the Different Data
The Durable Goods Orders (DGO) report released tonight showed the mixed results. The main DGO data reached -4.5% in January 2023, it was down more sharply than the consensus estimate pegged at -4.0%.
Meanwhile, the main DGO for the period of December 2022 was revised down from +5.6% to +5.1%. Core DGO data recorded a positive performance of +0.7%, far surpassing estimates of +0.1%.
However, the core DGO data for the December 2022 period was revised down from -0.2% to -0.4%. MarketWatch claimed this decline was related to the crash in aircraft orders received by Boeing.
Meanwhile other reports continued to grow well. Boeing received 250 contracts in December and jumped DGO data at the time, but orders fell to just 55 contracts in January.
Pending Home Sales Data Lift the Dollar
The USD Index slumped after the release of the DGO data. Its position only started to rise again after the release of Pending Home Sales data which skyrocketed +8.1% compared to the estimated 1.0%.
Simon Harvey, a head of FX strategy at Monex Europe, argues a slight improvement in investor sentiment today which was seen in rising global stocks Is likely to weigh on the dollar as well.
In addition, there was also a factor of fund outflows at the end of the month. That is due to profit-taking following the greenback's strong rally this month.
He also added that such a flow of funds is limited. The US dollar rate now shows varying in performance in major pairs. AUD/USD and NZD/USD continued to be hit at multi-month lows printed at the end of last week.
