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Gold prices fluctuate after strong US economic data

<strong>Gold prices fluctuate after strong US economic data</strong>
Ahmed Mamdouh

February 21, 2023

Gold prices fluctuated after the release of strong U.S. economic data that signaled the world’s biggest economy is resilient and thereby raised bets the Federal Reserve would continue monetary tightening.  

Data released on Tuesday showed that U.S. business activity climbed to the highest level in eight months in February, as the flash S&P Global Composite PMI, which tracks both the services and the manufacturing business activity, rose to 50.2 from 46.8 in January. Analysts had predicted a soar to 48.9.

Economic activity in the U.S. has moved to the expansion territory after surpassing the 50 mark, which separates expansion from contraction in the private sector.

“Despite headwinds from higher interest rates and the cost of living squeeze, the business mood has brightened amid signs that inflation has peaked and recession risks have faded,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.

Last week, a slew of economic data pointed that the U.S. economy is strong despite the ongoing Fed rate hikes, while inflation is still too high, therefore increasing the likelihood of further rate increases from the Fed.

In addition, several Fed speakers stressed that the U.S. central bank should move on with raising borrowing cost while needs to keep rates elevated for a more prolonged period.

It is worth mentioning that markets are currently predicting the Fed funds rate to peak just below 5.3% by July.

The key focus this week will be on Wednesday’ Fed meeting minutes and Friday’s core PCE data, the Fed’s preferred inflation measure.

As of 17:35 GMT, gold prices were slightly lower, hovering near $1840 an ounce, after hitting a low at $1830 earlier in the session. The yellow metal came under pressure after its failure to breach $1850 on Monday, but it remains above Friday’s bottom of $1818, which was the lowest level since December 30.