Gold prices saw a slight decline on Wednesday as the U.S. dollar and Treasury yields remained strong ahead of crucial inflation data, which could provide further insight into the Federal Reserve’s future interest rate decisions.
Spot gold fell by 0.2% to $2,354.76 per ounce by 0711 GMT. This decline follows the record high of $2,449.89 set on May 20.
U.S. gold futures also dropped by 0.1%, settling at $2,355.10.
The dollar maintained its strength against other currencies, reducing gold’s appeal for investors holding other currencies. Concurrently, the benchmark U.S. 10-year bond yields climbed to multi-week highs.
“Investors are likely booking profits with prices trading near $2,350. This represents a healthy consolidation after the sharp rally we saw last Monday,” stated Soni Kumari, a commodity strategist at ANZ. “Despite this, investors are positioning in gold due to the strong long-term fundamentals currently supporting it.”
Attention now turns to the U.S. core personal consumption expenditures (PCE) data, the Fed’s preferred inflation gauge, set to be released on Friday.
“A softer U.S. core PCE release could facilitate gold’s rebound to the $2,400 level, given the potential implications for the timing of rate cuts,” noted Tim Waterer, chief market analyst at KCM Trade, in a report.
Market participants are pricing in approximately a 59% chance of a rate cut by November, as per the CME FedWatch Tool.
Gold traditionally serves as an inflation hedge, but rising interest rates increase the opportunity cost of holding non-yielding assets like bullion.
Among other metals, spot silver gained 0.3% to $32.19 per ounce. Platinum fell 0.4% to $1,058.95, and palladium remained unchanged at $973.02.
In corporate news, BHP Group announced it needed additional time to negotiate with Anglo American, following the latter’s rejection of BHP’s £38.6 billion ($49.20 billion) offer ahead of a final bid deadline later today.
Additionally, the International Monetary Fund (IMF) has raised China’s GDP growth forecasts for 2024 and 2025 after a robust first quarter. China is a major consumer of both bullion and other industrial metals.
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