Gold rises as dollar weakens; attention turns to U.S. Fed minutes

July 3, 2024

Key points

• Gold prices increased by 0.1%, reaching $2,331.41 per ounce.
• Traders predict a 67% chance of a Fed rate cut in September.

Gold prices saw a modest rise on Wednesday, gaining 0.1% to $2,331.41 per ounce by 0026 GMT, while U.S. gold futures rose 0.3% to $2,340.50. This increase comes as the U.S. dollar weakened, making gold more affordable for holders of other currencies.

Picture: Gold on the rise, trading at 2329.43 as seen on the VT Markets app.

Powell cites “disinflationary path,” seeks more data before rate cuts.

Federal Reserve Chair Jerome Powell mentioned on Tuesday that the U.S. economy is on a “disinflationary path,” but he emphasised the need for more data to confirm this trend before any decision on cutting interest rates is made.

Lower interest rates typically benefit gold, which does not yield any interest, by reducing the opportunity cost of holding it. Currently, traders estimate a 67% probability of a Fed rate cut in September. This expectation is influencing market sentiment and boosting gold prices.

Recent data shows that U.S. job openings increased in May, following significant declines in the two preceding months. Although the labour market conditions are easing, the trend appears stable.

You might be interested: US dollar slips as inflation data points to rate cuts 

The minutes from the Fed’s June policy meeting, expected at 1800 GMT, are highly anticipated for further clues on the economic outlook. Additionally, jobs data, including ADP employment figures, weekly jobless claims, and non-farm payrolls, are due later in the week and will provide more context for the Fed’s decisions.

Precious metals see mixed performance amid platinum strike

In the broader precious metals market, spot silver rose by 0.2% to $29.56 per ounce, platinum added 0.6% to reach $996.64, while palladium decreased by 0.8% to $978.80. South Africa’s Impala Platinum reported a strike at its recently acquired Bafokeng operations in Rustenburg, primarily involving contractors demanding permanent positions. This development could impact platinum supply and prices in the short term.

If the Fed minutes suggest a dovish stance, we might see further gains in gold as investors seek safe-haven assets. The increase in silver prices aligns with gold’s upward trend, often seen as a cheaper alternative to gold. The strike at Impala Platinum’s operations could create supply disruptions, potentially leading to price volatility in the short term.

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