Gold staged a powerful recovery on Friday, climbing 2.1% to settle at $5,022.06 per ounce after a key inflation report revived hopes for monetary policy easing. The precious metal's advance erased Thursday's steep decline and resulted in a weekly gain of 1.2%. Silver outperformed, rising 3.4% to $77.70.
The catalyst was January's Consumer Price Index data, which showed core inflation rising at its slowest annual pace in nearly five years. This immediately shifted market expectations, with interest rate futures now pricing approximately a 70% probability of a Federal Reserve rate cut in June. Analysts noted the data triggered a "relief rally" across precious metals markets.
Thursday's session had seen gold tumble below the psychologically important $5,000 threshold, reaching $4,938.69 amid what traders described as cascading stop-loss orders. The swift reversal highlights how sensitive the metal remains to shifting interest rate expectations, given its non-yielding nature.
Physical market dynamics showed divergence. In India, dealers moved to offering discounts as high as $12 below official prices following sustained premiums, indicating consumer resistance at elevated price levels. Meanwhile, China's central bank continued its accumulation strategy, adding to reserves for a fifteenth consecutive month ahead of the Lunar New Year holiday.
Market attention now turns to upcoming economic releases that will test the sustainability of Friday's move. Key events include the Federal Reserve's January meeting minutes and the core Personal Consumption Expenditures price index—the central bank's preferred inflation gauge—along with preliminary GDP and purchasing managers' index data.
Traders will monitor whether gold can maintain its foothold above $5,000, a level that has recently acted as both technical support and resistance. The metal's trajectory remains caught between moderating inflation pressures and persistent labor market strength that could keep the Fed cautious about cutting rates too aggressively.
