Gold Rises Ahead of Key US Data, on Track for Fourth Monthly Gain

Gold prices are up slightly during today’s trading session, on track for their fourth straight monthly gain as investors await a key US inflation reading that could provide further insights into the Federal Reserve’s policy path.

Gold and the Dollar Now

– Gold futures are now up 0.1% to $2366 an ounce.

– Spot gold is up about 0.1% to $2345 an ounce.

– On the other hand, the dollar index is up 0.1% to 104.775 points.

Other Metals

– Silver is down 0.2% to $31.11 an ounce in spot trading.

– Platinum is down 0.2% to $1022.70 and palladium is down 0.2% to $946.25.

Investment Bank: Gold Awaits Strong Rise, What About Oil?

Analysts at Goldman Sachs (NYSE: GS) have expressed a positive outlook for commodities, expecting total returns to increase from the 13% seen so far this year to 18% by the end of the year. The financial institution has given several reasons for this positive outlook, such as continued demand growth, the potential for increased value in industrial metals and gold, and decreased geopolitical risks associated with oil prices.

Analysts have pointed to five key market trends that they believe will lead to significant opportunities in commodities: declining investment, the transition to low-carbon energy sources and the impact of climate change, risk reduction strategies, the expansion of data centers and artificial intelligence, and increased military spending. In addition, they note that current low levels of investment in commodities are leading to shortages in some areas, which will require higher prices to encourage investment in environmentally friendly production methods.

Furthermore, the firm notes that geopolitical risk mitigation strategies and inventory rebuilding efforts are supporting demand for gold and commodities, while the growth of data centers and artificial intelligence is increasing demand through energy consumption and rising incomes. Military spending is also contributing to increased demand for metals and refined petroleum products.

Specifically, Goldman Sachs expects a significant increase in copper prices, with further growth of 15% expected to bring the price per metric ton to $12,000 by the end of the year due to supply shortages from less expensive alternatives. For gold, analysts expect a 14% increase in price to $2,700 an ounce, attributing this to strong buying from central banks in emerging markets and households in Asia.

In the context of oil, Goldman Sachs expects Brent crude to remain between $75 and $90 per barrel, noting that there is value in maintaining a net long position in oil due to geopolitical hedging and the financial gains from holding futures contracts over time.

However, they expect natural gas prices to see no significant increases this summer in the United States and Europe due to current high levels of stored gas. In short, Goldman Sachs maintains a confident stance on the long-term opportunities and drivers of demand for commodities, expecting returns to rise by the end of the current calendar year.

US Dollar Falls After Weak US Economic Growth, A Wake-Up Call for the Fed

The US dollar deepened its losses following the release of revised US GDP data, which revealed a decline in the US economic growth rate from 1.6% to 1.3% at a rapid and alarming pace for the US economy.

Dow Jones futures reacted to the data by falling 0.8%, losing 0.8% of its value and currently trading at 38,218 points. Spot gold, on the other hand, rose 0.2% to $2342.66. All eyes are now on the inflation data due out tomorrow to be the real driver of interest rate expectations. The decline in US economic growth is a wake-up call for the Fed to speed up interest rate cuts, but the inflation data will be more decisive for investor expectations and moves

Dollar Demand as a Safe Haven

A combination of stronger-than-expected economic data, hawkish comments from several Fed officials, and a series of poorly received auctions have all led to a sharp rise in bond yields, prompting a rush to safer assets and boosting the dollar.

The conviction is growing that the Fed will not cut interest rates anytime soon, and traders are waiting for confirmation from the PCE data, the Fed’s preferred inflation gauge, due out on Friday, that inflation remained stable in April.

Before that, the revised first-quarter GDP reading is due out later on Thursday and is expected to show continued resilience in the US economy. The strength of the US economy gives the Fed more room to keep rates high for longer.

Euro Rebounds from Two-Week Low

In Europe, the euro/dollar pair rose 0.1% to 1.0810, rebounding from a two-week low ahead of eurozone business confidence data later in the session and then eurozone CPI data at the end of the week. The ECB is widely expected to announce a rate cut next week, but uncertainty about the outlook could be affected by the inflation data on Friday. The pound/dollar pair fell 0.1% to 1.2697, after sterling hit a two-month low in the previous session.

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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