(Bloomberg) — Gold advanced as traders raised bets on Federal Reserve rate cuts after a tame inflation reading, with some investors taking advantage of Thursday’s sharp selloff to buy the metal at a lower price.
US inflation was fairly mild at the start of the year, allaying concern about a bigger jump and boosting expectations that the Fed will trim rates.
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The yield on 10-year Treasury pushed lower after the print, with swap traders pricing in around 50% odds of a third cut by December. That helped bullion rise as much as 2.3%. Lower rates typically benefit non-yielding gold.
“The broader backdrop remains one of elevated volatility following this week’s sharp liquidation across precious metals, but today’s move suggests the correction may have overshot, with bargain‑hunting and position‑adjustments now providing support,” said Ewa Manthey, a commodity strategist at ING Bank.
Gold surged to a record above $5,595 in late January as a wave of speculative buying pushed the rally to a breaking point, before a rapid rout at the end of the month that pulled it back below $5,000 an ounce. Despite choppy price movements, gold is set to end this week higher.
Elsewhere, Chinese markets are closed next week for the Lunar New Year holiday. Demand for precious metals in the country has been frenetic in recent months, helping to power the broader rally.
Precious metals should continue to consolidate for a while as Chinese market participants who had been behind some of the volatility, particularly in silver, are on holiday, Commerzbank analysts wrote.
Spot gold climbed 1.9% to $5,016.90 an ounce as of 11:44 a.m. in New York. Silver rose 3.4% to $77.81. Platinum and palladium also gained. The Bloomberg Dollar Spot Index, a gauge of the US currency, was little changed.
–With assistance from Winnie Zhu, Robin Paxton, Preeti Soni and Jack Ryan.
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