Gold prices took a 1% dip on Monday due to profit-taking by investors, who are now keenly awaiting significant inflation data expected later this week. The upcoming figures are seen as key indicators for potential U.S. interest rate cuts in the near future.
Spot gold declined 1% to $2,336.76 per ounce by 1745 GMT, after reaching its highest price since April 22 just last Friday. U.S. gold futures also dropped 1.3%, closing at $2,343.
Phillip Streible, chief market strategist at Blue Line Futures, explained, “We’re likely seeing investors pulling out of gold ahead of important events like Jerome Powell’s address, along with the release of the Producer Price Index (PPI) and Consumer Price Index (CPI) later this week.”
Gold market participants are increasingly wary that the Federal Reserve may need weaker inflation numbers, not just a softening labor market, to proceed with interest rate reductions. “Gold bulls are cautious,” commented Tai Wong, an independent metals trader based in New York.
The yellow metal had risen more than 1% last week, bolstered by weak U.S. employment data, which strengthened bets on a possible interest rate cut this year. A Reuters poll of economists revealed that most expect the Fed to lower rates twice in 2024, with the first reduction anticipated in September.
Currently, market indicators such as the CME FedWatch Tool suggest there is a 63% chance of a rate cut in September. Lower interest rates make gold more attractive to investors, as the opportunity cost of holding non-yielding assets decreases.
The market’s attention will turn to U.S. inflation reports this week, starting with the PPI data on Tuesday, followed by CPI data on Wednesday.
In the broader precious metals market, silver edged up by 0.3% to $28.23 per ounce. Palladium, on the other hand, fell sharply by 1.7% to $961.50 per ounce.
Platinum saw a rise, surpassing the critical $1,000 per ounce mark for the first time in nearly a year, finishing up 0.6% at $1,000.55 per ounce. However, consultancy Metals Focus predicts that the average prices for platinum and palladium may decrease over the year, despite ongoing supply deficits.
In other news, BHP Group, the world’s largest listed miner, disclosed that Anglo American had turned down a revised buyout offer, which valued the company at 34 billion pounds ($42.67 billion)
As the week progresses, the performance of gold and other precious metals will likely be shaped by the much-anticipated inflation reports. Investors remain cautious as they await key indicators that could clarify the Federal Reserve’s next move. While gold has shown resilience in the past, its future trajectory depends on how inflation and the broader economic picture evolve in the coming months.
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