Gold prices are rising at this moment in trading today, Wednesday, as investors look ahead to the release of US inflation data that could provide clues about the Federal Reserve’s path to interest rate cuts.
Consumer Price Index (CPI) Data Release
The US CPI data is scheduled to be released at 12:30 GMT. According to a Reuters poll, the data is expected to show that core CPI rose 0.3% on a monthly basis in April, down from 0.4% the previous month.
Gold is data-driven at the moment, and if CPI starts to come down slightly, it will be positive for gold. However, “If CPI comes in higher than expected, it will shake all markets and confidence in the possibility of interest rate cuts.”
The weak jobs report last week and the below-expected US jobs report for April have increased expectations of a rate cut by September. The bullion is known as a hedge against inflation, but rising interest rates increase the opportunity cost of holding gold, which does not yield a return.
Federal Reserve Chairman Jerome Powell said on Tuesday that he expects US inflation to continue to decline in 2024 and indicated that the central bank is unlikely to have to raise rates again. However, data on Tuesday showed that US producer prices rose more than expected in April.
Gold and the Dollar Now
Gold futures are now up 0.31% to $2367 an ounce. While spot gold is up about 0.16% to $2361 an ounce. On the other hand, the dollar index is down about 0.11% to 104.780 points.
Other Metals
Spot silver rose 0.3% to $28.67 an ounce, while palladium gained 1.4% to $991.39. Platinum rose 1.9% to $1050.57, its highest level in nearly a year.
Oil Prices Drop Amid Demand Concerns and Dollar Strength
Oil prices are trending downward today, with Brent crude futures down 26 cents to $82.53 a barrel and US West Texas Intermediate (WTI) futures down 23 cents to $78.03 a barrel. The decline follows a drop of about $1 on Friday as Federal Reserve officials discussed whether current interest rates are enough to bring inflation down to their 2% target.
The ongoing debate among Fed officials has led to expectations that interest rates will remain steady, which in turn has boosted the US dollar. A stronger dollar typically makes oil, which is priced in dollars, more expensive for holders of other currencies, which could weaken demand.
Adding to the pressure on oil prices are signs of weak fuel demand, highlighted by rising inventories of gasoline and distillates in the US ahead of the US driving season. Despite these pressures, there is some support for the oil market based on expectations that OPEC+ and its allies may continue to cut supply in the second half of the year. On Sunday, Iraq’s oil minister reaffirmed his country’s commitment to OPEC-mandated voluntary production cuts and expressed his desire to work with member states to stabilize the oil market.
However, the oil minister indicated on Saturday that Iraq, OPEC’s second-largest producer, has made sufficient voluntary cuts and will not agree to further cuts at the upcoming OPEC+ meeting in early June. Earlier in May, OPEC+ noted that Iraq had exceeded its production quota by 602,000 barrels per day in the first quarter of 2024, but agreed to offset this with additional production cuts for the remainder of the year.
Euro Hits 5-Week High Ahead of Eurozone Growth Data
The euro rose in the European market on Wednesday against a basket of global currencies, extending its gains for the third consecutive day against the US dollar, reaching a five-week high amid positive risk sentiment dominating the foreign exchange market, as well as easing concerns about a widening interest rate differential between Europe and the United States.
In light of recent comments from European monetary policymakers, the European Central Bank is strongly approaching a rate cut next June, and in order to reassess this approach, investors are awaiting the release of eurozone economic growth data for the first quarter of this year later today.
Investors are also awaiting the release of key US inflation data for April, which will provide strong clues about the Federal Reserve’s interest rate path this year.
European Comments
Klaas Knot, Governor of the Dutch Central Bank and member of the ECB Governing Council, said on Tuesday: June could be a good opportunity to cut the first rate.
Pierre Wunsch, Governor of the National Bank of Belgium and Member of the ECB: The first two rate cuts of 25 basis points are over, that was the easy part, but the pace of cuts after that will be slower compared to the Federal Reserve’s easing of monetary policy.
US Inflation Data
Following the downward revisions to US PPI figures for March, markets are eagerly awaiting the release of CPI data for April later today. These figures will shed light on the extent of inflationary pressures facing policymakers at the Federal Reserve, providing fresh pricing for the likelihood of US rate cuts this year.
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Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances, or needs.
