This is because investors think political interference weakens the Fed’s ability to control rates, reducing confidence in the dollar and providing some support to Gold. Another factor supporting gold prices is the rising geopolitical tensions.
Strong US Data and Hawkish Fed Minutes Underpin Greenback
On the US front, the broad-based US dollar gaming some ground and hitting a one-week high. However, the upward trend was mainly supported by the hawkish Minutes of the US Federal Reserve’s (Fed) January monetary policy meeting. This was bad news for gold but good news for dollar, and that is why gold is still below the $5,000 level.
Notably, the minutes showed the Fed is not all on the same page as some officials think more rate cuts might be needed if inflation cools, while others worry that cutting too soon could mess with their 2% inflation goal.
Moreover, the gains in the US dollar were further bolstered by the strong US economic data. Well, industrial production actually came in stronger than expected in January, and manufacturing output had its best month in almost a year.
That pushed Treasury yields up and gave the dollar another boost. Despite this, markets are keeping in mind that the Fed could cut rates three times this year.
Gold Gains Support as Global Tensions Rise and US Economic Data Looms
On the geopolitical front, the latest US-led talks between Ukraine and Russia ended in Geneva, but honestly, there was not any real progress as they are still stuck over eastern parts of Ukraine under Russian control.