Gold prices inched up on a weaker dollar on Tuesday, although bullion struggled for momentum as investors were wary of placing big bets ahead of U.S. inflation data that could influence the Federal Reserve’s policy trajectory.
Spot gold (XAU/USD) rose 0.2% to $1,928.99 per ounce by 0531 GMT. U.S. gold futures (XAU/USD) were also up 0.2% at $1,934.60.
Bullion is being supported by a weaker dollar as the Fed seems to imply that they’re at the end of the tightening cycle, “but gold bugs appear hesitant to overcommit ahead of Wednesday’s U.S. inflation report,“.
The dollar (DXY) was near a two-month low on prospects of lower rates. A weaker dollar makes gold cheaper for holders of foreign currencies.
Several U.S. central bank officials on Monday said the Fed will likely need to raise interest rates further to bring down inflation, but the end to its current monetary policy tightening cycle is getting close.
Investors see a 95% chance that the central bank would raise rates in its July meeting into the 5.25-5.5% range, keeping them there until rate cuts could be seen in 2024, as per CME’s Fedwatch tool.
Higher rates dampen the appeal of bullion, which pays no interest.
The focus this week will be on the U.S. CPI (Consumer Price Index) data due on Wednesday, with core CPI in June expected to have risen 0.3% month-on-month, as per a Reuters poll.
“Any disappointment (i.e. actual CPI coming in higher than expectations) could lead to hawkish repricing and that would dim gold’s appeal,” said OCBC Executive Director and FX Strategist, Christopher Wong.
“More importantly, markets need to start trading the ‘more cuts to come in 2024’ narrative for gold to shine further.”
China and Hong Kong shares rose after Beijing extended its policy support to the ailing property sector, fuelling hopes for a fresh round of easing.
Spot silver (XAG/USD) rose 0.7% to $23.27 per ounce, platinum (PL) was up 0.5% at $931.40 while palladium climbed 0.6% to $1,247.28.
Gold prices were steady in early Asian hours on Tuesday as investors maintained a cautious stance ahead of U.S. inflation data that could influence the Federal Reserve’s rate policy trajectory.
FUNDAMENTALS REPORTS
- Spot gold (XAU/USD) held its ground at $1,925.89 per ounce by 0047 GMT. U.S. gold futures were flat at $1,931.30.
- The Fed will likely need to raise interest rates further to bring down inflation that is still too high, but the end to its current monetary policy tightening cycle is getting close, several U.S. central bank officials said on Monday.
- Investors see a 94% chance that the central bank would raise rates in its July meeting into the 5.25-5.5% range, keeping them there until rate cuts could be seen well into 2024, as per CME’s Fedwatch tool.
- Higher rates dampen the appeal of bullion, which pays no interest.
- The focus this week will be on U.S. CPI (Consumer Price Index) data due on Wednesday, with core CPI in June expected to have risen 0.3% month-on-month, as per a Reuters poll.
- An increasing number of countries are repatriating gold reserves as protection against the sort of sanctions imposed by the West on Russia, according to an Invesco survey of central bank and sovereign wealth funds published on Monday.
- In other precious metals, spot silver (XAG/USD) rose 0.1% to $23.13 per ounce, platinum gained 0.4% to $929.95, while palladium was up 0.2% at $1,242.51.
