Gold prices rose more than 1%, again hitting a record high, helped by the increased likelihood of the Federal Reserve easing monetary policy at its June meeting amid US inflation data.
On Friday, the Commerce Department reported that prices in the United States rose moderately in February, and the cost of non-housing services slowed significantly. The personal consumption expenditures price index (PCE) rose 0.3% last month, as expected. The data for January were revised upwards - to +0.4% from +0.3%. On an annualized basis, PCE grew by 2.5% after an increase of 2.4% in January. Economists also predicted an increase of 2.5%. Price pressure is easing, although the pace has slowed compared to the first half of last year. The data also showed that excluding volatile components (food and energy), the core PCE increased by 0.3% last month after rising by 0.5% in January (revised from +0.4%). In annual terms, the growth of the core PCE slowed to 2.8% from 2.9% in January (revised from +2.8%). The Fed is tracking PCE data to achieve its 2% inflation target. Meanwhile, inflation in the services sector, excluding energy and housing, rose by 0.2% after an increase of 0.7% in January. Policymakers monitor so-called super-base inflation to assess their progress in fighting inflation. Given that the core reading is now at its lowest level in almost two years, this potentially offers some validation for the Fed to kick-start its rate-cutting process sooner rather than later. According to the CME FedWatch Tool, markets see a 3.9% probability of a 25 basis point rate cut at the Fed meeting in May, and a 68.5% probability of a rate cut in June (compared to 70.1% a week earlier). Lower interest rates reduce the opportunity cost of holding bullion.