Gold experienced an upward climb on Monday as a result of a softer dollar, which rendered the precious metal more enticing for foreign investors. However, prices remained in close proximity to a three-month low as traders evaluated the likelihood of further interest rate hikes by the U.S. Federal Reserve.
By 05:38 GMT, spot gold saw a 0.3% increase, reaching $1,926.19 per ounce. Concurrently, U.S. gold futures also advanced by 0.3% to $1,936.00.
Last week, bullion faced a significant decline of nearly 2% due to hawkish remarks from Fed officials, indicating an intention for additional rate hikes to curb persistent inflation. The appeal of non-yielding gold diminishes when interest rates rise.
OCBC FX strategist Christopher Wong remarked, “We are approaching the end of the tightening cycle, but we’re not quite there yet as there remains a risk of an extension, hence the subdued price action.”
Investors currently anticipate a 72% likelihood of a rate hike occurring in July, with expectations of rate cuts commencing from 2024 onwards, as indicated by CME’s Fedwatch tool.
The dollar index experienced a 0.2% decline.
Nevertheless, the downward trend in gold was partially counterbalanced by robust physical consumption from central banks and China, along with hedging against potential recessions, according to analysts at Citi.
CFTC data revealed that speculators increased their net long position in COMEX gold by 1,322 to 94,626 in the week ending June 20.
Oil prices exhibited slight gains as concerns over crude supply emerged following the weekend issues in Russia. However, investors hesitated to draw definitive conclusions based on these developments.
“The Wagner fallout with Russia certainly spurred activity in the gold market during early Asia trading. With the situation de-escalating rapidly, gold remains resilient,” noted Clifford Bennett, chief economist at ACY Securities.
Spot silver surged by 1.5% to $22.75 per ounce, while platinum experienced a 1.3% gain, reaching $928.74.
Palladium, a material used in auto-catalysts, rose by 0.8% to $1,294.59.
Citi analysts added, “We anticipate the downtrend in palladium to persist… but we also acknowledge the increasing risk of a short squeeze in the event of any supply disruptions or unexpected surge in demand.”
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