Gold Price: XAU/USD rallies slightly below mid-$2050s, eyes on US inflation data

Highlights:

• Despite the rally in the USD, gold gained ground near $2,045.
• The US Non-Farm Payrolls (NFP) came in better than expected with an increase of 216K in December compared to 173K the previous month.
• Investors will be keeping a close eye on the US Consumer Price Index (CPI) which is due on Thursday.

The price of gold (XAU/USD) remains in positive territory despite a rebound in the U.S. dollar (USD) during Monday’s early Asian session. Friday’s better-than-expected U.S. jobs report boosted demand for the greenback. However, this week’s inflation data will be very important. 

Meanwhile, the U.S. Dollar Index (DXY), which measures the value of the greenback against a weighted basket of currencies used by U.S. trading partners, is bouncing off its late December lows to trade at 102.50, up 0.04% for the day.

U.S. inflation data for December will be in focus. The headline Consumer Price Index (CPI) is expected to show an increase of 3.2% y/y, while the core CPI is expected to ease to 3.8% y/y from 4.0% in the previous reading. If the data comes in strong, it could boost the greenback and weigh on USD-denominated gold.

On Friday, the US Nonfarm Payrolls (NFP) came in better than expected, rising by 216K in December from 173K previously. Elsewhere, the unemployment rate held steady at 3.7% in the same period, above the market consensus of 3.8%. Average hourly earnings rose to 4.1% in December from 4.0% in the previous reading. Traders are reducing their bets on interest rate cuts by the Federal Reserve (Fed). According to the CME Fedwatch tool, the Fed funds futures markets have priced in a 56% probability of a Fed rate cut in March.

Looking ahead, U.S. inflation data will be released on Thursday. This is measured by the Consumer Price Index (CPI). On Friday, the Chinese consumer price index and the U.S. producer price index for December are released. Additionally, many Fed officials will speak this week, including Bostic on Monday, Burr on Tuesday, Williams on Wednesday, and Kashkari on Friday.