Gold prices remained relatively unchanged on Monday as the strength of the U.S. dollar impacted the appeal of the precious metal, while market participants eagerly awaited key economic data to gain insights into the Federal Reserve’s future rate hike plans.
At 05:37 GMT, spot gold maintained its level at $1,919.89 per ounce, while U.S. gold futures experienced a slight decline of 0.1% to reach $1,927.50.
Matt Simpson, a senior market analyst at City Index, noted, “In the short term, it is likely that a retracement towards the range of $1,910-$1,913 will be met with buying interest, and bullish investors will aim to push the price towards the previous highs around $1,937.”
Simpson also mentioned that bargain hunters may be providing support for gold prices during this period.
Although May’s stagnant U.S. consumer spending indicated that the Federal Reserve’s efforts to curb inflation through rate hikes were gradually taking effect, the core PCE price index, which is the Fed’s preferred inflation gauge, showed a year-on-year increase of 4.6% after rising 4.7% in April.
Investors, as indicated by CME’s Fedwatch tool, currently perceive an 87% likelihood of a 25 basis points rate hike occurring in July. They expect interest rates to remain within the 5.25%-5.5% range until 2024 when cuts are anticipated.
Gold faced a 2.5% decline in the second quarter, primarily due to expectations of an extended period of rate hikes by the Federal Reserve. Higher interest rates tend to discourage investments in non-yielding assets like gold.
The dollar index, which had reached a two-week high on Friday, continued to exert pressure on gold prices by making the precious metal more expensive for holders of other currencies. [USD/]
The upcoming week is packed with significant U.S. data releases, including the U.S. Labor Department’s job openings and labor turnover survey, the monthly payrolls report, and the minutes from the June 13-14 Federal Reserve meeting.
According to ANZ analysts, while strong economic data could prompt a hawkish stance by the Federal Reserve in the short term, the conclusion of the rate hike cycle expected in the second half of 2023 could offer structural support for gold prices in the medium and long term.
Meanwhile, spot silver saw a modest increase of 0.5%, reaching $22.87 per ounce. Platinum recorded a marginal gain of 0.1% to reach $901.84, and palladium experienced a stronger rise of 0.9% to reach $1,237.97.
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