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Gold rises on soft dollar, geopolitical concerns

Monday, February 26, 2024

Today’s headlines

What’s happening: Gold prices gained on Friday amid weakness in the US dollar and escalating geopolitical tensions.

What happened: Prices for the safe-haven metal were buoyed by prospects of the US Federal Reserve delaying its interest rate decision.

Gold rose to more than a two-week high on Friday and ended the week with gains.

Why it matters: Traders have been trying to gauge the timing of US Federal Reserve’s interest rate cuts. Recent comments from Fed officials had fuelled speculations of the US central bank delaying its rate cut decision. Last week, Fed Governor Christopher Waller said there was “no rush” to reduce interest rates.

Fed minutes released last week also showed that most policymakers were concerned that cutting rates too soon would prove risky.

With traders expecting the Fed to delay its interest cut decision, the US dollar remained under pressure on Friday. The US dollar index, which measures the greenback’s performance versus a basket of major peers, recorded its first weekly decline in around two months. Weakness in the US dollar made the greenback-priced bullion cheaper for foreign buyers.

Rising geopolitical concerns continued to provide support to the safe-haven metal on Friday.

Gold for April delivery gained $18.70 to close at $2,049.40 per ounce on Friday.

In other metals trading, silver for March delivery added 20 cents to $22.98 per ounce, while May copper declined 2 cents to $3.90 per pound.

How gold performed so far: US gold prices have gained around 0.4% over the past month but is down about 1.5% year to date.

What to watch: Investors await the release of economic data on US GDP growth and core PCE price index, due to be released this week. Analysts expect the PCE price index for the US to rise 2.8% year-over-year in January, following a 2.9% increase in December. The US economy is expected to expand at an annualised 3.3% in the fourth quarter, versus 4.9% in the prior quarter.

Markets will also monitor gold demand for India, which is among the world’s biggest gold consumers. Data on India’s GDP growth rate is also scheduled for release next.

The markets today

The Canadian dollar will be in focus today ahead a couple of major economic reports

Context: The CAD/USD forex pair moved higher on Friday as investors assessed the latest economic data.

Details: Canada’s government budget deficit increased to C$4.47 billion in December, from C$1.98 billion in the year-ago month. This also represented the sixth straight month of deficit.

Data released last week showed retail sales in Canada declining by 0.4% in January. Industrial producer prices in the country also declined by 0.1% in January, versus a 1.6% decline in the previous month.

Weakness in price of crude oil, one of Canada’s major exports, limited the overall gains for the loonie. US WTI crude oil for April delivery declined $2.12 to close at $76.49 per barrel on Friday.

The CAD/USD forex pair gained 0.25% to 1.3489 on Friday, with the pair ending last week mostly flat. The S&P/TSX Composite Index rose by 0.45% to close at 21,413.15 and ended the week with gains of around 1%.

What to watch: Investors await the release of data on manufacturing sales and wholesale sales from Canada today. Canada’s manufacturing sales are expected to rise 0.3% in January, following a 0.7% decline in December. Analysts expect wholesale sales in Canada to increase 0.1% in January, following a rise of 0.3% in December.

Other Markets: European indices closed higher on Friday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 Index up by 0.28%, 0.28%, 0.70% and 0.43%, respectively.

The news shaping the markets

US President Joe Biden is looking to hold a meeting with congressional leaders on Tuesday to arrive at a decision on a stalled national security bill, which provides support to Ukraine, Israel and Taiwan. The news sent the RUB/USD slightly lower in forex trading this morning.


Belgium’s business confidence barometer rose 3.6 points, but remained negative at a reading of -12.8 in February, exerting pressure on the EUR/USD forex pair.


Mexico’s current account surplus widened to $11,662 million in the fourth quarter, from $1,796 million in the year-ago period. However, the MXN/USD pair moved lower in forex trading this morning.


Macau’s tourist arrivals surged by 104.7% year-over-year to 2,861,609 in January. However, the latest reading represented a 2.8% month-over-month decline and exerted pressure on the MOP/USD forex pair.


China’s foreign direct investment declined by 11.7% year-over-year to 112.71 billion yuan in January, which sent the CNY/USD pair lower in forex trading this morning.

What else to watch today

Spain’s producer prices change, UK’s Confederation of British Industry’s monthly retail sales balance, US new home sales, Dallas Fed manufacturing index and building permits, as well as Central Bank of Brazil’s focus market readout.


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