Gold climbed toward $5,020 per ounce, extending its rally as investors weighed a more cautious Federal Reserve outlook against stronger US economic data and renewed geopolitical risks. Minutes from the January FOMC meeting indicated that most policymakers now expect the disinflation process to take longer than previously thought. Some officials suggested that interest rates may need to remain restrictive for an extended period, or even be raised again if inflation settles above the Fed’s target. This prompted markets to dial back expectations for multiple rate cuts this year.
The shift in rate expectations came on the heels of robust labour market indicators, including a drop in jobless claims to 206,000, highlighting that underlying demand in the economy remains firm. At the same time, rising tensions between the US and Iran have pushed crude oil prices higher, stoking concerns over renewed input cost pressures and reinforcing gold’s role as a hedge against stubborn inflation. This has supported investment demand for gold even as physical buying in Asia stays seasonally muted around the Lunar New Year period.
