Gold soft on stronger dollar ahead of next week’s Fed

Gold soft on stronger dollar ahead of next week’s Fed

Gold soft on stronger dollar ahead of next week’s Fed meeting. The bullion is trading in a tight range as investors awaited direction from next week’s U.S. monetary policy decision.

A rally in Asian equities early Wednesday amid speculation of increased Chinese market stimulus, took some interest away from other markets like precious metals. 

The World Bank said Tuesday that the global economy is in a precarious state and may be heading for a substantial slowdown amid high interest rates. It raised its world GDP forecast for the year to 2.1% from the 1.7% it predicted in January but cut the 2024 outlook to 2.4% from 2.7%. Global GDP grew 3.1% last year. A worsening economy in the past has lured haven investors to assets like gold. 

August gold futures rose 0.4% Tuesday to settle at $1,981.50 an ounce on Comex, and the front-month contract gained 0.6% in the first two days of the week. Bullion retreated 0.9% in May after increasing 0.6% in April and 8.1% in March. The metal fell $2.40 in 2022. The August contract is currently down $7.30 (-0.37%) an ounce to $1974.20 and the DG spot price is $1961.70.

About 77.1% of investors tracked by the CME FedWatch Tool are betting that the Fed will keep interest rates unchanged at the next meeting June 14, while 22.9% expect the central bank to raise rates by another 25 basis points. A week ago, most investors were expecting rates to go up.

But the picture changes with expectations for the July and September Fed policy meetings. Most investors betting on a rate hike of either 25 or 50 basis points at those two meetings. The Fed increased rates by another 25 basis points last month and has raised rates by 25 basis points three times this year. The moves followed rate hikes of 50 basis points in December and 75 basis points each in June, July, September and November 2022. The federal funds rate is currently at 5.00% to 5.25%. 

The next big piece of economic data due out before the Fed meeting, and likely to provide some guidance to the market, is the consumer price index report for May, scheduled for release on June 13, the day before the policy decision. Fed policymakers have indicated that they closely follow both inflation and labor market data when determining monetary policy. 

U.S. inflation measured by the personal consumption expenditures price index, the Fed’s favorite inflation measure, bounced higher in April, while U.S. nonfarm payrolls rose a more-than-expected 339,000 in May, well above the 190,000 forecast by economists, data released last week showed. 

The U.S. wholesale inventories report and weekly initial jobless claims come out Thursday and may influence market direction. 

July silver futures edged up 0.2% Tuesday to settle at $23.67 an ounce on Comex, though the front-month contract slid 0.3% in the first two days of the week. Silver decreased 6.5% in May after gaining 4.4% in April and 15% in March. It rose 3% in 2022. The July contract is currently up $0.005 (-0.02%) an ounce to $23.665 and the DG spot price is $23.67.

Spot palladium decreased $1 Tuesday to $1,430.00 an ounce, though it gained 0.4% in the first two days of the week. Palladium fell 9.3% last month after rising 2% in April and 3.7% in March. Palladium lost 5.7% in 2022. Currently, the DG spot price is down $2.80 an ounce to $1429.00.

Spot platinum increased 0.3% Tuesday to $1,043.50 an ounce and gained 3.5% in the first two days of the week. Platinum retreated 7.4% in May after adding 8.5% in April and 3.7% in March. Platinum surged 10% in 2022. The DG spot price is currently up $2.20 an ounce to $1042.90.

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