The price of gold jumped by almost 0.9%, while market participants are waiting for the release of US inflation data, which may affect the timing of the Fed's monetary policy easing. However, since the beginning of the week, precious metal prices have fallen by 2.1% amid easing concerns about a serious escalation of the conflict in the Middle East.
Meanwhile, US data presented yesterday showed that GDP growth slowed sharply in the 1st quarter, but the rise in inflation highlighted recent statements by Fed members that the central bank is in no hurry to cut interest rates. Higher rates reduce the appeal of holding non-yielding gold.
Today, investors will focus on the publication of the personal consumption expenditures price index (the Fed's preferred inflation indicator), which will clarify the prospects for rates in the United States. Experts warn that a significant acceleration in inflation could further strengthen expectations that the Fed may cut rates only once this year. Forecasts suggest that overall PCE inflation increased in March by 0.3% m/m and 2.6% per annum. The next Fed meeting will be held on Wednesday, May 1, while economists expect interest rates to remain unchanged again. According to the CME FedWatch Tool, markets see a 11.5% probability of a 25 basis point rate cut at the Fed meeting in June, and a 31.6% probability of a rate cut in July. Overall, markets believe that the US Federal Reserve will be one of the last major central banks to cut rates - markets currently estimate a 59.0% probability of the first rate cut by September.