Gold futures prices plummeted by $65.60 per ounce on Monday, or 2.73%, the biggest one-day decline since February 2021.
Zhitong Finance learned that the price of gold futures plummeted by $65.60 per ounce on Monday, or 2.73%, the biggest one-day decline since February 2021. The biggest one-day decline in gold futures prices in more than three years was mainly due to the easing of the geopolitical situation in the Middle East — Israel's restrained response to Iran's recent missile and drone attacks. Despite large-scale attacks on Israel by more than 300 missiles and drones last Saturday, Israel's retaliation was relatively moderate and avoided a sharp escalation of tension in the Middle East.
Although Israel has vowed to retaliate, its actions — including firing drones and F-35 fighter jets into Iranian territory — were limited in scope and caused less damage. This cautious response may be influenced by pressure from the US and others, effectively allaying concerns about the wider regional conflict.
From a technical perspective, Monday's sell-off may have been an isolated event, triggered by a specific fundamental factor of Israel's restrained retaliation. Israel's restrained retaliation has allayed concerns about the escalation of the Middle East conflict. Market participants may now turn their attention to the upcoming March inflation data, in particular the US personal consumption expenditure (PCE) inflation report due to be released on Friday, April 26.
According to the Cleveland Federal Reserve's “Proximity Forecast” estimates, the report is expected to show an increase of 0.3% month-on-month for both the overall PCE and core PCE price indices in March. This will be lower than the 0.4% monthly increase in the Consumer Price Index (CPI) announced on April 10, a level which indicates that inflation is likely to accelerate.
The agency predicts that personal consumption inflation data may confirm that up to now, the US has made no progress in curbing inflation in 2024, and the annual growth rate in March may reach 2.6%, up from 2.4% in January. This trend has dampened expectations that the Federal Reserve will cut interest rates in the next few months.
If inflation continues to accelerate, it may seriously affect the timing for the Federal Reserve to relax its current monetary policy stance. The Federal Reserve currently maintains the benchmark interest rate between 5.25% and 5.5%. Although the Federal Reserve is expected to cut interest rates for the first time in June, the Federal Reserve's recent statement indicates that the continued high level of inflation may require maintaining interest rates at the current level for a long period of time, which may adversely affect the price of gold. The trend has declined. Currently, investors' overall risk appetite is also picking up. On Monday, European and American stock markets rebounded.