On Tuesday, gold prices experienced a slight downturn, with investors eagerly anticipating crucial U.S. inflation data that could shed light on the Federal Reserve’s potential timing for interest rate adjustments.
As of 0732 GMT, spot gold witnessed a decline of 0.3% at $2,342.80 per ounce, following a modest 1% increase on Monday.
Conversely, U.S. gold futures showed a 0.4% rise, reaching $2,343.80.
Kelvin Wong, serving as a senior market analyst for Asia Pacific at OANDA, pointed out, “A robust dollar scenario, coupled with a shift in U.S. monetary policy orientation towards seeking evidence to initiate interest rate hikes rather than easing, poses a significant risk, potentially triggering further corrective movements in spot gold.” He emphasized the pivotal role of the dollar’s strength in influencing gold prices.
However, Wong added a note of optimism in the short term, highlighting that spot gold currently leans more towards positivity than negativity. He identified $2,310 as a crucial short-term support level for the current week.
The impending release of the core personal consumption expenditures price index (PCE), serving as the Federal Reserve’s preferred inflation gauge, is slated for Friday.
Recent Fed meeting minutes unveiled a policy stance focused on maintaining the benchmark policy rate at its existing level for the time being. Nonetheless, deliberations regarding potential future rate hikes were also evident.
Traders are currently pricing in approximately a 63% likelihood of a rate cut by November, according to data from the CME FedWatch Tool.
While gold is traditionally perceived as a hedge against inflation, the opportunity cost of holding non-yielding gold escalates with higher interest rates.
According to Reuters technical analyst Wang Tao, spot gold could potentially breach the nearest resistance level at $2,357 per ounce, paving the way for an upward movement towards the $2,363-$2,373 range.
In other market developments, Vietnam’s central bank announced its decision to discontinue gold auctions in the domestic market, opting instead for a new approach aimed at stabilizing domestic prices.
Meanwhile, spot silver observed a 0.8% decline, settling at $31.42, while platinum and palladium both experienced losses of 0.7%, with prices at $1,047.20 and $982.24, respectively.
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