Spot gold prices held steady near $4750 during the North American session on Thursday, April 9th. Following the release of US February Personal Consumption Expenditures (PCE) price index data, which matched expectations, the metal failed to extend gains from the previous day's peak above $4800. The US Dollar Index was largely flat at 98.95. Market sentiment turned cautious, influenced by doubts surrounding a US-Iran ceasefire agreement and mixed signals from US economic data. Traders are assessing how robust inflation, slowing economic growth, and geopolitical risks will intertwine to affect the Federal Reserve's policy path and gold's balancing act between its roles as a safe-haven and an inflation hedge.
Inflation Data Meets Expectations, Fed Policy Outlook Remains Balanced The US PCE price index increased 2.8% year-over-year in February, aligning with market consensus, while the monthly reading rose 0.4%. The core PCE price index, which excludes food and energy, decelerated to 3.0% annually from 3.1% in January, with the monthly figure also meeting forecasts. Personal income declined 0.1% month-over-month, whereas personal spending increased by 0.5%. These figures indicate stable price pressures within the US consumer sector without signs of significant cooling, suggesting underlying inflation remains somewhat persistent.
As the Fed's preferred inflation gauge, the steady PCE data implies policymakers have little room for significant near-term adjustments to the interest rate trajectory. With inflation still above the long-term 2% target, the scope for aggressive easing is limited; however, the lack of an upside surprise also prevents excessive market fears about tightening. For gold, this balanced environment reduces pressure from rising rates while sustaining its appeal as a hedging instrument. Traders will monitor subsequent details on personal income and spending to gauge consumer resilience and potential spillover into broader price pressures, which will influence the interplay between the US dollar and gold pricing.
Fragile Middle East Ceasefire Boosts Safe-Haven Premium The stability in spot gold prices is closely linked to Middle East tensions. The temporary ceasefire agreement between the US and Iran is facing severe tests. Iranian Parliament Speaker Mohammad Bagher Ghalibaf stated that three parts of the agreement have already been violated, particularly concerning Israeli military actions in Lebanon. Iran emphasizes that Lebanon falls within the ceasefire's scope, a view contested by the US and Israel. Tehran has warned it might withdraw from the agreement if attacks on Lebanon persist. US President Trump indicated on social media that US forces would remain positioned near Iran until a genuine agreement is fully adhered to. Bilateral negotiations are set to resume on Saturday in Pakistan, aiming for a permanent ceasefire and the reopening of the Strait of Hormuz. Against this backdrop, crude oil prices have rebounded, further fuelling global inflation concerns.
The Fed's March meeting minutes highlighted policymakers' dilemma. Most participants noted that a prolonged Middle East conflict could weaken labor market conditions, potentially justifying additional rate cuts. Simultaneously, many participants pointed out that risks of sustained oil price increases could lead to inflation persisting at higher levels for longer, even raising the possibility of considering rate hikes. The fragility of the ceasefire directly amplifies short-term risk aversion, while the oil rebound indirectly influences inflation expectations through cost-push channels, creating a dual transmission mechanism supporting gold.
Weakening Economic Growth Momentum Highlights Gold's Defensive Attributes The third estimate for US fourth-quarter 2025 GDP growth was revised down to 0.5%, from the second estimate of 0.7% and the preliminary reading of 1.4%. This marks a significant slowdown compared to the 4.4% growth recorded in the third quarter, with the downward revision primarily stemming from adjustments to investment data.
Slowing economic growth may strengthen market expectations for Fed easing, although inflation data provides some constraint. A weaker growth outlook typically boosts demand for safe-haven assets. As a non-yielding asset, gold often demonstrates more stable performance during periods of adjusting rate expectations. The coexistence of fading growth momentum and persistent inflation could prolong the Fed's观望期, providing a macroeconomic foundation for gold prices to trade within a range.
Dual Risks Highlighted in Fed Minutes The Fed's March meeting minutes further reinforced uncertainty around the policy path. Most participants focused on the potential drag on the labor market from a prolonged Middle East conflict, seeing it as a rationale for additional cuts. In contrast, many participants emphasized the persistent inflationary push from rising oil prices, warning that high inflation might necessitate policy tightening. This divergence underscores the difficulty policymakers face in balancing growth and inflation objectives. Combined with the February PCE data and the Q4 GDP revision, traders are recalibrating expectations for the peak rate and the timing of easing, leaving the gold market caught between competing macro signals and geopolitical events.
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