Quick overview

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Traders increased their bets on  Federal Reserve rate cuts following a low inflation reading, and some investors took advantage of Thursday’s steep selloff to purchase gold at a lower price. At the beginning of the year, US inflation was relatively low, which reduced worries about a larger increase and increased expectations that the Fed would lower interest rates.

 

After the release, the yield on the 10-year Treasury fell, and swap traders estimated a third cut by December, with odds of about 50%. That contributed to a 2–5% increase in bullion prices. Non-yielding gold benefits from lower rates.

According to Ewa Manthey, a commodity strategist at ING Bank, “despite today’s move suggesting the correction may have overshot, with bargain-hunting and position-adjustments now providing support,” the overall environment remains one of elevated volatility following this week’s sharp liquidation across precious metals.

 

The rally reached a breaking point in late January when gold surged to a record above $5,595  drop at the end of the month brought it back below $5,000 an ounce due to a wave of speculative buying. Despite unpredictable price swings, gold is predicted to close higher this week.

The Lunar New Year holiday the following week will cause Chinese markets to close. The rally’s overall strength has been bolstered by the nation’s frantic demand for precious metals in recent months. As the Chinese market participants who contributed to the volatility, particularly in silver, are on vacation, Commerzbank analysts predict that precious metals will continue to consolidate for a while.