Gold in Limbo as Traders Await Clarity on Fed Rate Cut Path

Gold prices are hovering near recent lows as market participants await fresh cues from Federal Reserve officials for more clarity on the timeline of potential interest rate cuts. Lower interest rates tend to boost the appeal of gold, which does not yield a return. Markets are currently pricing in a 65% chance of a US rate cut in September.

Gold and the Dollar Now

Gold futures are now down 0.1% to $2321 an ounce. Spot gold is hovering around $2314 an ounce. On the other hand, the dollar index is up 0.12% to 105.430 points.

Other Metals

Silver is down 0.1% to $27.25 an ounce in spot trading, while platinum is up 0.5% to $981.10 and palladium is up 0.4% to $974.59.

Oil Retreats as US Inventories Rise

Oil prices edged lower in early Asian trading Wednesday as industry data showed a rise in US crude and fuel inventories, suggesting potential weakness in demand, while caution prevailed over supply expectations ahead of an OPEC+ meeting next month.

Brent crude futures fell 30 cents, or 0.36%, to $82.86 a barrel by 0348 GMT. US West Texas Intermediate (WTI) crude futures dropped 25 cents, or 0.32%, to $78.13 a barrel. The two benchmarks saw limited declines in the previous session amid signs of easing supply tightness and weakening global oil demand following a report by the International Energy Agency (IEA) on Tuesday.

US crude inventories rose by 509,000 barrels in the week ended May 3, according to market sources citing American Petroleum Institute (API) figures. Gasoline and distillates inventories also increased. Official government data on US crude and fuel inventories is due at 1430 GMT. Analysts polled by Reuters forecast US crude inventories to fall by about 1.1 million barrels last week. Hopes for a ceasefire in the Gaza Strip have also added downward pressure on oil prices in recent sessions.

Bitcoin Poised for Crazy Surge if This Happens!

British investment bank Standard Chartered said in a research report on Tuesday that the risk of US financial dominance as the Federal Reserve monetizes government debt is increasing, and such a scenario should be supportive of cryptocurrencies as investors seek alternative assets.

In the meantime, a Donald Trump election victory could also be a positive for cryptocurrencies. The report said: “We believe a Trump II administration would be broadly positive through a more supportive regulatory environment for digital currencies.”

The bank said that US financial dominance is likely to have three effects on the US Treasury yield curve: “A steeper two-year/10-year term structure, a wider break-even point versus real yields, and an increase in the term premium,” adding that the price of bitcoin has a positive correlation with all three of these potential developments.

The bank said that if Trump wins the election, a second administration could accelerate the withdrawal of foreign official buyers of US Treasuries due to financial concerns, noting that during his first term, the average annual net selling of US government debt was $207 billion a year compared to just $55 billion under Biden. The report added: “We expect a Trump II administration to be actively supportive of Bitcoin (and digital assets more broadly) through more flexible regulation and approval of US spot ETFs.” Standard Chartered reiterated its end-year target for bitcoin of $150,000 and $200,000 by the end of 2025.

Yen Moves into Negative Territory Under Scrutiny of Japanese Authorities

The Japanese yen fell in Asian trading on Wednesday against a basket of major and minor currencies, extending its losses for the third straight day against the US dollar, trading below the 155 yen per dollar barrier, raising the prospect of intervention by Japanese authorities in the foreign exchange market again.

Analysts say that any intervention by the Bank of Japan would only be a temporary reprieve for the yen, given the persistent wide interest rate differentials between Japan and the US in favor of US rates. Also putting downward pressure on the Japanese currency is the rebound in the yield on 10-year US Treasuries, which is reducing the appeal of the yen as a safe-haven investment option for carry traders and funding trades.

Japanese Authorities

BOJ Governor Kazuo Ueda said on Wednesday that the BOJ would closely monitor the impact of yen moves on inflation in its monetary policy guidance.

Japanese Finance Minister Suzuki Reiterates Readiness to Intervene in Currency Market

Japanese Finance Minister Shunichi Suzuki reiterated that Japanese authorities are prepared to respond to excessive volatility in the currency market.

While the Ministry of Finance declined to comment on whether it was behind the sale of US dollars last week, top currency diplomat Masato Kanda reiterated on Tuesday that the government “will continue to take a firm stance” against disorderly yen movements.

160 Yen Level a Red Line

The 160 yen level has become a red line for the Bank of Japan, which appears unlikely to allow this level to be breached in the near term, especially after spending around $60 billion in the foreign exchange market.

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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.

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