Gold futures experienced a significant surge on Thursday, driven by disappointing retail sales figures and a subsequent weakening of the US dollar. The February contract settled at $2746.30, nearing its previous peak reached in December. This rally followed a period of decline triggered by an unexpected rise in the Producer Price Index (PPI), but strengthened expectations for Federal Reserve interest rate cuts.
Gold futures surged on Thursday, with the February contract settling at $2746.30, after trading to an intraday high of $2757.60, approaching the previous peak set on December 12th. The rally was fueled by disappointing retail sales data and subsequent dollar weakness.
The December decline was triggered by an unexpected inflation report, specifically the Producer Price Index for November, which showed a 0.4% monthly increase—double the economists' forecast of 0.2%. This followed October's 0.2% rise, bringing the annual headline PPI to 3%. According to the U.S. Commerce Department, December retail sales rose 0.4%, falling short of the expected 0.5% increase and down from November's revised 0.8%. This data, combined with Wednesday's lower core Consumer Price Index reading, has strengthened expectations for Federal Reserve interest rate cuts, pressuring the dollar and yields.
Despite the market optimism, a rate cut at the upcoming Federal Open Market Committee meeting on January 29 appears unlikely, with only a 2.7% probability. Interest rate futures traders are targeting July as the month when the Fed will have cut interest rates, with just a 25.2% chance that the Fed will maintain its current Fed funds rate between 4.25% and 4.50%.
GOLD FUTURES RETAIL SALES DOLLAR INTEREST RATES
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