Gold prices edged higher on Wednesday following weaker-than-expected US retail sales data, bolstering hopes that the Federal Reserve will cut interest rates this year. Spot gold was up 0.1% at $2,328.67 per ounce as of 0631 GMT, while US gold futures fell 0.2% to $2,330.30.
Picture: Gold trading at 2332.74 as seen on the VT Markets app.
Tuesday’s data showed US retail sales barely rose in May, indicating that economic activity remained sluggish in the second quarter. Weaker Treasury yields overnight and subdued movements in the US dollar following the disappointing retail sales data provided some relief to the yellow metal.
The anticipation of lower interest rates reduces the opportunity cost of holding non-yielding bullion, making gold more attractive to investors.
While US policymakers have guided for only one rate cut through 2024, market expectations are leaning more dovish. This dovish sentiment is supported by pockets of economic weakness, which may continue to lift gold prices.
Recent data highlights a moderation in the labor market and easing price pressures, prompting the Federal Reserve to seek further confirmation that inflation is cooling. The market focus now shifts to the weekly jobless claims data due on Thursday and the flash purchasing managers’ indexes on Friday.
Gold prices have entered a consolidation phase after hitting a record high of $2,449.89 on May 20. On June 7, data showed that China’s central bank paused gold purchases for its reserves in May after 18 months of buying, leading to the biggest daily drop in bullion since November 2020.
Central bank buying of gold took a breather in May, and any continuation of this trend poses a risk to the pace of upside momentum in gold prices.
Meanwhile, spot silver was down 0.5% at $29.37 per ounce, platinum rose 0.1% to $973.05, and palladium lost 0.1% to $885.88. The moderation in these metals reflects the broader market sentiment influenced by US economic data and central bank activities.
As traders anticipate the upcoming jobless claims data, it’s essential to monitor these developments closely. Any further signs of economic weakness could reinforce the expectations of a rate cut, potentially driving gold prices higher.
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