Rate cut hopes lift bullion
Gold rebounded strongly after a softer-than-expected US inflation report boosted expectations that the Federal Reserve could move ahead with additional interest rate cuts this year. Investors also stepped in to buy the metal following a steep selloff earlier in the week.
Inflation data showed price pressures were relatively contained at the start of the year, easing fears of an upside surprise. In response, yields on the 10-year US Treasury note declined, while swap markets priced in roughly a 50% probability of a third rate cut by December.
That shift in rate expectations supported bullion, which climbed as much as 2.5% during the session. Lower interest rates typically benefit gold, which does not offer a yield, by reducing the opportunity cost of holding the metal.
Volatility follows record highs
The rebound comes after a volatile stretch for precious metals. Gold surged to a record above $5,595 an ounce in late January, driven by heavy speculative demand. The rally eventually reversed sharply, dragging prices back below $5,000 by month-end.
Despite the pronounced swings, bullion remains on track to post a weekly gain. Market participants said the latest rise suggests that the prior correction may have gone too far, prompting bargain hunters to return.
Ewa Manthey, commodity strategist at ING Bank, noted that while volatility remains elevated following the recent liquidation across precious metals, renewed buying interest and portfolio adjustments appear to be stabilizing prices.
Chinese holiday could ease swings
Attention is also turning to Asia, where Chinese financial markets will be closed next week for the Lunar New Year holiday. China has been a major source of demand for precious metals in recent months, contributing to the broader rally.
Analysts at Commerzbank said the temporary absence of Chinese market participants could lead to a period of consolidation, particularly in silver, which has seen heightened price fluctuations.
In New York trading, spot gold advanced, while silver also moved higher. Platinum and palladium posted gains as well. Meanwhile, the Bloomberg Dollar Spot Index edged slightly lower, offering additional support to dollar-denominated commodities.
