Gold trading reminder: PCE meets expectations, initial jobless claims increase, and gold prices hit a one-month high

Gold prices hit a one-month high 2050.59 Feb. 29, closing 2043.99 U.S. inflation data was in line with expectations and a small increase in initial U.S. jobless claims provided momentum for gold prices last week. Traders turned their attention to further comments from Federal Reserve officials for clues to a rate cut.

Friday (March 1) Asian morning trading,Spot goldGold prices hit a one-month high on Thursday (Feb 29) 2050.59, closing in 2043.99 U.S. inflation data was in line with expectations and a small increase in initial U.S. jobless claims provided momentum to gold prices last week. Traders' attention turned to further comments from Federal Reserve officials for clues to a rate cut.

The latest data came in line with expectations following recent strong inflation data, with Tai Wong, an independent metals analyst in New York, saying "gold bulls just needed an excuse to buy and they found it", adding that gold could face technical resistance around $2,065.

The data revealed that the U.S. personal consumption expenditures (PEC) price index rose 0.3% in January and the core PCE price index rose 0.4%, putting pressure on the dollar and making gold cheaper for investors holding other currencies.

The PCE price index rose 2.4% year-on-year in January, the smallest year-on-year increase since February 2021, with 12 rising 2.6%. The January PCE inflation data, like the January consumer and producer inflation data, was also attributed to corporate price increases at the beginning of the year. Economists believe that the model used by the government to exclude seasonal fluctuations from the data may not have fully factored in these price increases.

Excluding volatile food and energy components, the core PCE price index rose 0.4% month-on-month in January, the largest monthly increase since February last year. The December data was revised down to 0.1%, compared with a previous increase of 0.2%.

Service sector prices rose 0.6% month-on-month in February, the biggest gain since January last year, after rising 0.3% in December. Housing and utility costs rose 0.6%, driving service sector prices higher. Financial services and insurance costs rose 1.3%, likely reflecting higher stock prices. Service prices rose in restaurants, bars, hotels and motels, as did entertainment and health care prices.

The core PCE price index rose 2.8% year-on-year in January, the smallest increase since March 2021, and rose 2.9% in December. The Federal Reserve tracks the PCE price index to assess progress towards its 2% inflation target. The month-on-month increase in the PCE price index remained at 0.2% for some time, a necessary condition for inflation to return to its target

A separate report from the Labor Price Index Department on Thursday showed initial jobless claims rose by 13,000 in the week ending Feb. 24, to a seasonally adjusted 215,000.

The number of renewals increased by 45,000 to 1.905 million in the week ending February 17, during the survey period for the government's February non-farm payrolls data.

The number of people renewing unemployment claims rose between the January and February survey periods, indicating that the unemployment rate may have risen in February from 3.7% in January.

Christopher Rupkey, chief economist at FWDBONDS, said: "The economy is not off track and the inflation fears that emerged in January seem unlikely to last, so it is still possible that Fed officials will consider a first rate cut at their June meeting."

The CME's FedWatch tool shows that the market currently sees a 68% chance that the Federal Reserve will cut interest rates in June.

Earlier this week, Federal Reserve officials said the door is opening for a rate cut that could come later this year.

Fed officials chose to downplay recent data showing a rebound in price pressures last month and instead focus on broader developments in inflation, which they said would likely set the stage for a rate cut later this year.

"I expect the road to be bumpy. Every month there will be events that drive components of some inflation measures and may cause inflation to go up or down," Mr. Bostic, the president of the Atlanta Fed, said in an interview at a banking conference in Atlanta, Ga.

Mr. Bostic said he remained focused on long-term trends and reiterated his view that the Fed "will start in the summer" if the economy develops as he expectsinterest rate cut。

Loretta Mester, the president of the Cleveland Fed, said in an interview on Thursday that three rate cuts remained her baseline view. "If the economy evolves as I expect, it feels pretty much like that," she said. The strong inflation data in January did not change her judgment, though she added that, like all Fed policymakers, she would give an updated rate cut forecast at her next meeting in about three weeks.

Like Meister and Bostic, Chicago Fed President Austan Goolsbee also dismisses January's inflation data as a sign of a reversal in inflation, saying he believes improvements in the supply of goods and labor last year set the stage for further declines in U.S. inflation this year, a signal that he still supports a rate cut later this year.

David Meger, director of metals trading at High Ridge Futures, said: "The constant rhetoric from the Federal Reserve suggests there is no rush to cut rates, and the news has been absorbed by the market." If there is a potential change that hints at a little bit of an early rate cut, that would be good for gold. "