Gold price under pressure

Gold futures fell below $2,000 an ounce this week in foreign markets, the lowest level in two months, as the U.S. dollar rose. The appreciation of the American currency followed the publication, on Tuesday, of data on the dynamics of US inflation. According to the Labor Department, U.S. consumer prices rose more than expected in January amid rising rent and health care costs.

Official data showed that the consumer price index rose by 0.3% in January, compared to December, when the advance was 0.2%. On an annual basis, US inflation rose 3.1% in January, after a 3.4% advance in December. Even if the figure for January is lower than that of the last month of last year, it exceeds analysts' expectations: 2.9%. For the monthly evolution, analysts expected a 0.2% increase in consumer prices.

Core inflation, which excludes volatile prices such as food and energy, rose 0.4% in January, after a 0.3% advance in December. On an annual basis, core inflation remained stable in January, at 3.9%.

Even though the data announced by the Department of Labor disappointed analysts, who were betting on inflation falling below the 3% threshold for the first time since March 2021, they did not change their estimates related to future monetary policy, anticipating that the bank the US central bank (Federal Reserve - Fed) will start reducing interest rates in May. Fed officials have drawn attention, however, that they are in no hurry to cut interest rates and before making a decision in this regard they want to see conclusive evidence that inflation is on a sustainable downward trajectory. Starting in March 2022, the Fed raised the policy rate by 525 basis points to the current range of 5.25% to 5.50%.

Gold has held above $2,000 an ounce since mid-December, buoyed by demand for safe-haven assets fueled by geopolitical tensions and expectations that the Fed will begin easing monetary policy this year, according to think .ing.com. Analysts at ING believe that the outlook for the gold price will largely depend on Fed policy, and if the pace of easing is reduced this year, it will jeopardize the forecast released by the Dutch bank for the end of 2024 of $2,150 an ounce.

Yesterday, on the American market, at 07:07 local time, the ounce of gold for delivery in April was quoted at $2,004.70, down 0.1% compared to the previous day. The gold price rose by 13% last year.

• Global gold demand at record level in 2023

Global gold demand hit a record high in 2023 and is set to rise further this year as the Fed is expected to cut interest rates, according to the World Gold Council (WGC).

Figures published by the WGC at the end of January show that, last year, global gold consumption rose by around 3% to 4,899 tonnes, on the back of solid demand from outside regulated markets as well as massive purchases by central banks. This is the highest level since the WGC published data in the field in 2010.

Annual net purchases by central banks reached 1,037 tonnes last year, just 45 tonnes below the record level set in 2022.

On the over-the-counter (OTC) market, annual demand growth reached 753% in 2023, the highest level since 2011, WGC data shows. "We estimate that investors will continue to accumulate gold at an accelerated pace this year," said Joseph Cavatoni, analyst at WGC.

According to the quoted source, purchases of gold for jewelry could decrease in 2024, due to the slowdown of the economy and high prices, after last year consumption in this segment stood at 2,093 tons. India, the second largest global consumer, could be the exception, with demand from the Asian nation expected to recover to 800-900 tonnes over the next two years, after falling to 748 tonnes in 2023. The recovery is underpinned by rising incomes, in the context of the advance of the economy, according to the estimates of P.R. Somasundaram, Regional Director of WGC India.

In China, the demand for gold for jewelry is likely to remain stable, amid the depreciation of the national currency and increasing economic uncertainty.