Gold Retreats Ahead of Key Inflation Data Release

Gold prices are edging lower in today’s trading, Tuesday, as investors await key US inflation data that could provide clues about the extent to which the Federal Reserve may cut interest rates.

PCE Inflation Data in Focus

The release of the Personal Consumption Expenditures (PCE) price index, the Fed’s preferred inflation gauge, is scheduled for Friday.

The minutes of the Fed’s meeting released last week indicated that monetary policy is currently “likely to keep the federal funds rate at its current level” but also reflected discussions about the possibility of further hikes. Traders’ bets suggest growing skepticism that the Fed will cut rates more than once in 2024, currently pricing in about a 63% chance of a rate cut by November.

Gold and Dollar Now

– Gold futures are now down 0.33% to $2344 an ounce.

– Spot gold is falling by about 0.32% to $2343 an ounce.

– On the other hand, the dollar index is down about 0.11% to 104.400 points.

Other Metals

– Silver is up 0.1% to $31.71 in spot trading, platinum is up 0.2% to $1055.85, and palladium is up 0.4% to $992.32.

US Fuel Demand Expectations Drive Oil Prices Ahead of OPEC+ Meeting

Oil prices are edging higher in today’s trading, Tuesday, extending gains from the previous session, supported by expectations of strong fuel demand from the United States during the summer and ahead of the OPEC+ production policy decision at its June 2 meeting.

Oil prices rose by more than 1% on Monday in quiet trading due to public holidays in the UK and the US after a bearish week marked by expectations of higher US interest rates for a longer period in the face of persistent inflation.

Some analysts said that expectations of strong fuel demand as the summer driving season and vacations begin in the US have provided support for prices.

“Despite the general view that higher interest rates could lead to weaker oil demand growth, real-time mobility data suggests that oil demand growth remains broadly robust,” said Giovanni Stanovo, an analyst at UBS, in a note to clients.

On the air travel front, data from aviation analytics firm OAG showed that the number of seats on US domestic flights for May rose 5% month-on-month and about 6% year-on-year to just over 90 million, surpassing 2019 levels.

The data added that international airline seat numbers for May were up 11% year-on-year to around 14.2 million, with levels also up 8% from the same period in 2019.

Meanwhile, eyes will also be on the upcoming online meeting of the OPEC+ group on Sunday, where traders and analysts expect production cuts to remain in place, further supporting prices.

Upbeat demand expectations from China have also added further support to prices after Beijing established its third state-backed investment fund to boost the semiconductor industry.

Oil Prices Now

– Brent crude for July delivery is up six cents to $83.16 a barrel.

– The most active August futures contract is up five cents to $82.93.

– US West Texas Intermediate (WTI) crude futures for July delivery are at $78.80 a barrel, up $1.08, or 1.39%, from Friday’s close, after trading during a US holiday on Monday for Memorial Day with no settlement.

Global Bank Expects Gold to Reach This High Level in the Coming Months

The global head of commodity research at Citigroup (NYSE:C) has revealed that the recent pullback in gold prices will be temporary as the Federal Reserve will implement multiple rate cuts, pushing gold prices to $3,000 in the next 12 months.

In an interview with Bloomberg TV earlier on Friday, Max Layton was asked how much his team was focused on the role of the dollar in metals markets, including the potential impact of the interest rate path.

“The Fed is expected to cut rates five times this year, and that will certainly, we believe, be the driver that takes gold higher,” Layton said.

Citigroup believes gold is the asset that will benefit most from this type of interest rate move. “We’re going to get to $3,000 an ounce over the next 12 months,” Layton said. When Layton was asked about the full market pricing for just one rate cut this year and how that would affect gold prices, he acknowledged that it would necessarily dampen

And when Leighton was asked about the full market pricing for just one rate cut this year, and how that would affect gold prices, Leighton acknowledged that this would necessarily dampen their expectations. He explained: “Certainly, that would make us less optimistic.” “But the fundamental drivers of gold are very physical right now, so we feel there is support for gold prices. It is clear that gold has broken the relationship with real interest rates in recent times, and it was all about the huge Chinese retail demand.”

Akash Doshi, head of commodities research at Citi in North America, said during an interview with Yahoo Finance on April 16: “In the summer of 2019, I was in your studios expecting gold to reach $2000 an ounce over the next 12 months. But now we believe that a price of $3000 an ounce will be trading over the next year or so.”

Doshi explained: “I would like to point out that if there is a recession in the United States, which the markets are not pricing in at the moment, it could also be another push towards $3000 an ounce of gold over the next 6 to 12 months.”


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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