Gold prices experienced an upward trend on Tuesday as some traders speculated that recent underwhelming economic data from the United States could prompt the Federal Reserve to reconsider its trajectory for interest rate increases. Meanwhile, market participants eagerly awaited the release of minutes from the central bank’s previous meeting for further indications.
At 09:31 a.m. EDT (1331 GMT), spot gold saw a 0.4% increase, reaching $1,928.09 per ounce. However, trading volumes were likely thinner due to a US holiday. Concurrently, US gold futures also gained 0.3%, reaching $1,935.90.
Analyst Giovanni Staunovo from UBS remarked, “Weaker-than-expected US economic data released on Monday, including PMIs, have supported gold. Market participants will closely track upcoming US job market data, watching if previous US interest rate hikes will slow down the US economy.” Staunovo added that the minutes of the Fed’s June meeting, scheduled for release on Wednesday, might align with Federal Reserve Chair Jerome Powell’s recent testimony, sounding more hawkish in nature.
According to CME’s Fedwatch tool, investors perceive an approximately 86% probability of a 25-basis-point hike in July. Higher interest rates tend to discourage investment in gold, which yields no interest.
This week, the focus will also be on non-farm payrolls data following a decline in US manufacturing during June. Nicholas Frappell, Global Head of Institutional Markets at ABC Refinery, noted, “Right now, headwinds for gold are expectations of a further 50 bps tightening, more liquidity withdrawal, and rates remaining relatively elevated for some time.”
Additionally, attention is directed towards fresh developments in the ongoing US-China trade war. Beijing has imposed restrictions on the export of certain metals utilized in semiconductors, electric vehicles, and high-tech industries, potentially impacting market dynamics. Previous instances of trade tensions have favored the US dollar, resulting in reduced demand for gold.
In the precious metals market, spot silver observed a 0.6% rise to $23.02 per ounce, while palladium climbed 0.8% to $1,238.92. Platinum also displayed a noteworthy surge of 1.4% to $919.06, positioning itself for a third consecutive session of gains.
Staunovo emphasized, “The white metals remain linked to the performance of gold. That said, economic growth concerns have a bigger impact as those metals have a higher industrial usage than gold.”
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