Key points
Gold prices held steady on Monday after data showed U.S. inflation subsided, bolstering hopes that the Federal Reserve will start cutting interest rates this year.
Picture: Gold on the rise, trading at 2325.10 as seen on the VT Markets app.
Spot gold rose 0.1% to $2,327.12 per ounce, as of 0202 GMT. Prices jumped more than 4% in the second quarter. U.S. gold futures eased 0.1% to $2,336.60.
Data showed on Friday that the personal consumption expenditures index increased 2.6% after advancing 2.7% in April. May inflation readings were in line with economists’ expectations.
The latest U.S. inflation data came in line with consensus and did little to sway current market rate expectations for the Fed’s easing process to kickstart in September. However, any failure to defend the $2,280 level may potentially pave the way for gold prices to head towards $2,200 next.
Lower interest rates reduce the opportunity cost of holding non-yielding bullion.
Market focus shifts to remarks from Fed Chair Jerome Powell on Tuesday, followed by minutes from the Fed’s latest policy meeting on Wednesday and U.S. labour market data later in the week.
Uncertainties related to inflation, macroeconomic growth, U.S. elections, and geopolitics should continue to support the safe haven demand for gold. Although central bank purchases have slowed down in recent months, emerging market central banks will likely continue to diversify their reserves into gold.
Spot silver remained flat at $29.12 per ounce, platinum fell 0.2% to $990.90, and palladium inched up 1.1% to $982.62.
Key metals consumer China’s manufacturing activity fell for a second month in June while services activity slowed. This contraction signals ongoing economic challenges, which could influence global demand for metals.
As China struggles to maintain its economic momentum, these trends might put downward pressure on industrial metals prices while bolstering safe-haven assets like gold.
Looking ahead, if Fed Chair Powell’s comments align with market expectations, gold prices could maintain their current levels or even inch higher. However, any unexpected hawkish signals could lead to a short-term dip.
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