On February 12, 2023, gold prices saw a slight decline after reaching new heightsThe price of COMEX gold futures and spot gold in London recorded a two-day dropWhile the overall upward trend remains intact, market sentiment has turned cautious due to overbought conditions and anticipation of upcoming U.S. inflation data.
Market analysts continue to emphasize the persistent long-term upward trajectory of gold pricesHowever, they warn of potential risks to the short-term outlook, particularly if the U.S. core inflation data comes in unexpectedly high, which could shake investor confidence.
As of the afternoon trading session on February 12, gold prices had recorded a minor dip for the second consecutive dayAt approximately 5:50 PM Beijing time, COMEX gold futures fell by 0.65%, settling at $2,913.5 per ounceSimilarly, London spot gold dropped 0.33%, priced at $2,887.76 per ounceDomestically, the main contract for Shanghai gold futures saw a decline of 0.49%, closing at 681.22 yuan per gramThe spot gold T+D contract also dropped 0.68%, resting at 679.98 yuan per gram.
The recent adjustments in gold pricing can be attributed to profit-taking behavior as highlighted by Tim Water, Chief Market Analyst at KCM TradeHe noted that with the current gold prices hitting historic highs and the imminent release of U.S. inflation data, it is natural for market participants to consolidate their positions.
As per remarks made on February 11, the U.S. economy exhibits strong performance, and the Federal Reserve is not in a hurry to implement further rate cutsIf the economy continues to grow robustly and inflation rates remain far from the 2% target, the Fed is expected to maintain a cautious policy stance for an extended periodHowever, unforeseen weaknesses in the labor market or inflation dipping more than anticipated could trigger a potential easing of monetary policyThe Consumer Price Index (CPI) report is due for release on Wednesday evening, followed by the Producer Price Index (PPI) data the subsequent Thursday.
Analysts highlight that the upcoming CPI data and Federal Reserve Chairman Jerome Powell’s congressional testimony may serve as critical catalysts influencing gold prices
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A CPI or PPI report that exceeds expectations could solidify the Fed's cautious approach, restraining upward potential for gold in the near termConversely, signs of deflation could heighten expectations for rate cuts, likely propelling gold prices higher.
In the long-term perspective, gold prices are projected to remain elevated, continuing their upward trajectory since 2025. As of February 12, the yield on COMEX gold futures stands at approximately 10%. Retail prices for gold jewelry have surged; in China, the retail price of gold ornaments has climbed from around 779 yuan per gram to over 870 yuan per gram at multiple retail outlets, reflecting a cumulative increase of over 11% since the beginning of the yearAdditionally, shares of gold-related companies have gained momentum, with Chifeng Jilong Gold Mining increasing by over 27% this year, followed by other firms such as Laisen Tongling up by 18%, Hunan Gold over 14%, and Zijin Mining around 12%.
According to data from the World Gold Council, total assets in global gold ETFs reached $294 billion by the end of January, marking a month-end record highDuring January, gold ETFs attracted a net inflow of approximately $3 billion, mainly spurred by investments from European markets, whereas North American investors opted to sell off their gold ETF holdingsNotably, Europe has been identified as the primary region for gold ETF fund outflows for much of 2024.
Shenwan Hongyuan Futures asserts that the key drivers behind the current rally in gold prices include market adjustments to the Federal Reserve's slower pace of interest rate cuts, as well as concerns stemming from U.S. tariff policies that have prompted a shift of gold stocks from London to COMEX inventories.
Data from the London Bullion Market Association shows that at the end of January, the amount of gold held in London decreased by 151 tonnes, bringing total supplies down to 8,535 tonnes, while COMEX inventories rose significantlyThis dynamic has contributed to persistent increases in gold prices, leading to a squeeze in the spot market for gold, with expectations that further price escalations could become self-fulfilling
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