Gold Rises as Dollar Softens: Impact of Inflation Report on Fed’s Interest Rate Decision

Gold prices saw a slight increase on Wednesday, the U.S. dollar weakened a bit. This happened right before an important report on inflation, which might give us hints about what the Federal Reserve, the central bank in the U.S., will do with interest rates this year.

At around 11:48 AM (GMT), the price of gold went up by 0.2% to ,033.90 per ounce. In the U.S., the futures for gold also rose by 0.3%, reaching ,040.00 per ounce.

A person named Han Tan, who is the chief market analyst at Exinity Group, mentioned that if the inflation report shows numbers that are higher than what people expect, it might make the Federal Reserve delay their plan to change interest rates. If that happens, the price of gold could decrease. On the other hand, if evidence shows that inflation in the U.S. is slowing down, the price of gold might go up, possibly reaching ,100 soon.

The value of the U.S. dollar, compared to other currencies, went down by about 0.1%. This makes gold more attractive for people using other currencies.

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Investors are now looking forward to the U.S. consumer inflation numbers that will come out on Thursday. The predictions say that inflation probably increased by 0.2% in December and 3.2% compared to the same time last year.

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The New York Federal Reserve did a study that found consumers expect inflation to go down. Also, Michelle Bowman, who works for the Federal Reserve, said on Monday that the U.S. monetary policy is now “sufficiently restrictive,” changing her earlier opinion.
Some experts predict a 68% chance that the Federal Reserve might reduce interest rates in March. If that happens, it would make gold more appealing because lower interest rates mean it’s not as costly to invest in gold.