Gold prices remain within a certain range. The market is showing caution ahead of a busy week of policy meetings from central banks including the Bank of Japan and the Bank of Canada. Meanwhile, the U.S. dollar index is hovering near the key support level of 103.00, awaiting the release of key economic indicators such as preliminary fourth-quarter gross domestic product data and the core personal consumption expenditures price index for December.

U.S. Treasury bond yields continue to rise, with the 10-year Treasury bond yield reaching 4.10%, putting indirect pressure on gold prices. Gold prices retreated on Monday as investors reassessed the Federal Reserve’s interest rate outlook.

The futures market generally believes that interest rate settings will remain unchanged compared to the January 30-31 Federal Open Market Committee meeting. However, investors lowered the outlook for policy easing to five percentage points from six percentage points previously. The probability of a rate cut in March fell to 42%, down sharply from 70% a week ago, according to CME Group’s FedWatch tool.

Additionally, Fed officials, including Christopher Waller, John Williams and Raphael Bostic, have said they are in no rush to cut rates even though rate hikes may be done. On Friday, San Francisco Fed President Mary Daly said the current monetary policy situation was sound and risks to the economy were balanced. Daly recommended lowering interest rates very cautiously and stressed that it should not undermine the return of inflation to the 2% target. She said the Fed will focus on maintaining full employment this year rather than ensuring price stability in 2023. Two key economic reports due out this week could go a long way in determining which path central bank policymakers may favor, as well as how markets react to shifts in monetary policy.

The U.S. Department of Commerce will release the preliminary value of fourth-quarter gross domestic product (GDP) on Thursday, and investors will get their first look at the overall economic growth in the fourth quarter of 2023. Economists surveyed by Dow Jones expect the total volume of all goods and services produced by the U.S. economy to grow at a 1.7% rate in the final three months of 2023, which would be the slowest pace since a 0.6% decline in the second quarter of 2022. .

One day later, the U.S. Commerce Department will release the December personal consumption expenditures (PCE) price index, which is the Fed’s most important inflation indicator. The consensus forecast for core personal consumption expenditures prices (excluding the volatile food and energy components) in December is for a 0.2% increase and a 3% increase for the full year.

Both data will attract widespread attention, especially the inflation number, which has been moving closer to the Fed’s 2% target but has not yet reached it.

Chicago Fed President Goolsby said in an interview with CNBC: “Everyone should be paying attention to this to determine what path the Fed will ultimately take on interest rates. This is not just about secret meetings or decisions. Fundamentally, this is Depends on the data. If there is clear evidence that we are on track to get inflation back to target, that would allow us to reduce restrictions.”

Ahead of major events in the United States, the Richmond Fed will release its January manufacturing index later on Tuesday.

Policymakers have been supportive of tightening interest rates to ensure inflation returns to the 2% target in a sustainable manner. Precious metals are facing some selling pressure as price pressures remain high due to strong consumer spending and full employment conditions, and prospects for imminent interest rate cuts fade.

At the same time, the lack of new clues about tensions in the Middle East has also weakened the appeal of gold. In this data-filled week, investors should prepare for the potential for intense volatility ahead.

Fed officials are not expected to comment this week as the central bank enters a lockdown ahead of its Jan. 31 meeting. This week, market participants will pay close attention to January’s preliminary S&P global PMI, preliminary fourth-quarter GDP data, and December’s core PCE price index. If the economic data is upbeat, it will further dampen expectations of a rate cut in March.

“Commodities are unlikely to benefit from core inflation in 2024,” said Natasha Kaneva, global head of commodities strategy at JPMorgan Chase. “Inflation should fall below 3%, so that, coupled with proper timing of the business cycle,” she said. , these are the two conditions needed to initiate long positions, making the outlook for the sector in 2024 very strategic.