Tuesday saw little movement in gold prices despite a weaker dollar as investors resisted making large wagers before U.S. inflation data that could affect the Federal Reserve’s policy course.
By 0231 GMT, spot gold remained steady at $1,926.19 for an ounce. At $1,930.20, U.S. gold futures were unchanged.
The Fed seems to be hinting that they are at the end of the tightening cycle, which is supporting gold prices. However, gold bugs “appears hesitant to overcommit ahead of Wednesday’s U.S. inflation report,” according to Matt Simpson, senior market analyst at City Index.
On expectations of lower rates, the dollar (.DXY) was close to a two-month low, while benchmark US yields were essentially unchanged at 4.0018%.
For owners of foreign currencies, gold becomes more affordable as the dollar declines.
The Fed will certainly need to raise interest rates further to lower the still-too-high inflation, according to several U.S. central bank officials, but the cycle of tightening its monetary policy is about to come to an end.
According to CME’s Fedwatch tool, there is a 95% likelihood that the central bank would increase interest rates at its meeting in July, maintaining them there until potential rate cuts in 2024.
The appeal of bullion, which doesn’t pay interest, is diminished by higher rates.
This week’s attention will be on the U.S. CPI (Consumer Price Index) data, which is due on Wednesday. According to a poll, the core CPI in June is predicted to have increased 0.3% month-over-month.
“Because we’re used to inflation slowing down, an upside surprise would cause the most erratic reaction and put pressure on gold. In order to support a bullish breakout, gold bulls need inflation to behave, according to Simpson.
Asian equities rose as investors hailed the likelihood of a halt to rate hikes and hoped China would provide economic stimulus to boost sluggish growth.
Spot silver increased 0.2% to $23.16 an ounce, platinum and palladium each increased 0.3% to $929.56 and $1,243.81, respectively, in the group of precious metals.