Gold Surpasses $2,200 Level

At the close, spot gold was up 0.5% at $2,189.89 per ounce. U.S. gold futures settled 0.6% higher at $2,212.7.

Gold prices leapt above the $2,200 level on Wednesday as investors prepare themselves for upcoming inflation data that is hoped to provide further signs that the Federal Reserve can move ahead with interest rate cuts in the coming months.

This Friday will see the release of the U.S. Core Personal Consumption Expenditures Price Index (CPE), which is the Fed’s favorite measure of inflation. In January the index rose by 0.3% on a monthly basis and 2.4% on a year-by-year basis. Expectations for the February reading are for a slight increase to 0.4% for monthly PCE and 2.5% for the year-over-year reading. Annual Core PCE inflation is expected to hold steady at 2.8%.

While that’s still above the Fed’s 2% inflation target it maintains the positive trend and if PCE is as expected, or even lower than expectations, investor hopes for rate cuts will be reinforced. Current expectations for a June rate cut are 70% according to the CME FedWatch tool.

Gold hit a record high last week following dovish commentary from the Fed, and a lower than expected PCE reading could spark a rally to a new record high. Lower interest rates are bullish for gold as they reduce the opportunity cost of holding yieldless gold.

And while investment demand for gold has been dented by higher rates, global central banks have continued to feed their appetite for the safe haven asset. Higher gold prices do have a downside though as they reduce retail investors demand for the precious metal.

In other precious metals silver was up 0.6% at $24.56 per ounce, platinum lost 0.9% to $894.85 and palladium fell 0.7% to $986.31.