Gold prices rose in early Friday trading, reaching just below $5,000. The precious metal has been under pressure following the recent rebound in the US dollar, which strengthened against other major currencies after the release of better-than-expected US employment data. The figures led investors to pare back bets on near-term interest rate cuts. The stronger dollar creates a headwind for the precious metal due to the inverse correlation between the two assets, capping the upside for gold prices. Against this backdrop, investors will be focused on the release later today of US inflation data for January. The figures have the potential to shape market expectations regarding the Federal Reserve’s rate-cutting path, with implications for both the US dollar and bullion prices. A reading below the forecast 2.5% annual inflation rate would reinforce the case for more aggressive rate cuts, a scenario that would likely weigh on the US dollar. Conversely, higher-than-expected inflation would strengthen the argument for caution in lowering interest rates, with the dollar likely to extend its gains and continue to pressure gold prices.
Ricardo Evangelista, ActivTrades
Source: ActivTrader
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