In the early hours of Friday, January 17, spot gold showed signs of stability, trading within a narrow range at approximately $2713.55 per ounceOn Thursday, gold prices reached a peak not seen in over a month, hitting $2724.61 per ounce, just shy of the two-month high of $2726.05 recorded on December 12. By the end of the trading day, gold settled at $2714.49 per ounce, marking a third consecutive day of gainsThis upward trend coincided with a decline in U.STreasury yields, spurred by the latest economic data that suggested softer core inflation, enhancing expectations for a more dovish stance from the Federal Reserve.
According to the U.S

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Labor Department's report released on Thursday, initial claims for unemployment benefits rose to 217,000 for the week ending January 11, exceeding the estimated figure of 210,000 predicted by a Reuters surveyFurthermore, December retail sales increased by 0.4% month-on-month, slightly below expectations, although November’s number was revised upward to 0.8%. The report also noted that U.Simport prices experienced a modest rise in December, marking the third consecutive month of increases, which hints at a rather benign inflation outlook.

Alex Ebkarian, Chief Operating Officer of Allegiance Gold, commented on the data, stating, "The rise in initial unemployment claims beyond expectations indicates a softening labor marketAdditionally, we have observed a decrease in U.S

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Treasury yields, thus enhancing the appeal of gold as an investment." Following the release of retail sales, unemployment claims, and import price data, the yield on ten-year Treasury notes saw a reduction, trading close to a one-week lowFederal Reserve Governor Christopher Waller projected that there might be three to four interest rate cuts this year, further impacting Treasury yields.

Waller had also indicated that if the current U.Seconomic data continues to show signs of weakness, such cuts remain a distinct possibility this yearFollowing his statements, the U.Sinterest rate futures market increased its expectations for a rate cut in 2025 from around 37 basis points late on Wednesday to approximately 43 basis points on ThursdayThe probability of a rate cut occurring at the Federal Reserve's June meeting is now estimated at 69%. Before Waller’s remarks, traders had anticipated that the next rate cut would come sometime in the latter half of the year.

Waller also mentioned on a CNBC program that inflation "is close to our 2% target." He highlighted that projected data shows that the key measure of core inflation—known as the Personal Consumption Expenditures Price Index, which omits food and energy costs—has been near the Federal Reserve's target for six out of the last eight months.

The Thursday report has cast a shadow over the U.S

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economic growth outlook and supported expectations that the Federal Reserve will at least cut rates once this yearAhead of this data release and the less-than-robust core inflation figures from Wednesday, some investors had begun to anticipate a more stable stance from the Federal Reserve throughout the year, while a few had even considered the possibility of rate hikes.

John Luke Tyner, the Head of Fixed Income and Portfolio Manager at Aptus Capital Advisors, expressed, "The softening data, especially when compared to last year's elevated figures, should move year-on-year data in the right directionI believe if we see a few more data releases similar to Wednesday's (core inflation slowing) and Thursday's, the market will start to reassess the likelihood of rate cuts—at least two cuts, aligning with the Federal Reserve's projections."

Among the various economic indicators, the January Philadelphia Federal Reserve Manufacturing Index surprised many with its performance

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The index surged to 44.3 in January, far exceeding the market expectation of a negative five, a discrepancy that caught analysts off guardSome speculate that this remarkable increase may be an anomaly triggered by short-term unique factorsIt is noteworthy that this rise denotes the largest increase since April 2021.

On Thursday, the yield on ten-year Treasury notes fell by 4.1 basis points to 4.654%, touching a low of 4.587%—the lowest mark since January 6. However, Robert Tipp, Chief Investment Strategist and Global Fixed Income Head at PGIM Fixed Income, commented, "The Federal Reserve would prefer to lower rates to ensure the economy's continued expansionNevertheless, even if rates are cut... I don’t foresee a significant drop in long-term Treasury yields because, as we’ve seen in recent months, the yield curve is normalizing."

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