Gold firms as dollar slips; Yellow metal’s bulls brace for inflation data
Investing.com - Gold prices inched up on Monday as the dollar slid ahead of key inflation data that could decide the action in coming weeks by the world’s major central banks, most of whom are girding for higher interest rates.
The front-month August gold contract on New York’s Comex settled at $1,933.80 an ounce, up $4.20, or 0.2%, on the day. It was the first time the U.S. gold benchmark had not made a three-month bottom since Thursday’s low print of $1,919.85.
The spot price of gold, which reflects physical trades in bullion and is more closely followed than futures by some traders, was at $1,922.83 by 16:12 ET (20:12 GMT), up $1.36, or 0.07%.
“Investors adopted a more cautious stance as major central banks continue fighting inflation with rate hikes at the time most were believed to be already on pause and preparing to move in the opposite direction,” Valeria Bednarik, analyst at FXStreet, wrote in a commentary.
Gold still up 5% on year as inflation bites
Ed Moya, analyst at online trading platform OANDA, said in a commentary on Friday:
“The dollar has been rallying on strong demand for Treasuries as investors worry about the global growth outlook. After tumbling to the $1,920 level, gold is starting to attract safe-haven flows as the stock market selloff intensifies.”
Gold prices are range bound as the half-year mark approaches.
For June thus far, the yellow metal is down 2.6% after a 1.8% slide for May. Notwithstanding that, it is still up more than 5% on the year.
Inflation higher than desired by U.S. to European authorities suggests that economies on both sides of the Atlantic are chugging along just fine to keep safe-haven demand alive for the yellow metal..
But with central banks from the Fed to the BoE and ECB eyeing more rate hikes, the dollar and U.S. Treasury yields could see fresh spikes at the mid-year point, weighing on gold..
Investors will get a fresh update on the possible future path of interest rates on Friday with the release of May data on the personal consumption expenditures price index, the Federal Reserve’s preferred inflation gauge.
Inflation here, there, everywhere
In the 12 months through April, the PCE price index as well as the core rate were still running well above the Fed’s 2% target.
The inflation numbers will feed into investor expectations around the Fed’s next rate decision in July after the central bank paused tightening at its June meeting but signaled more hikes ahead. Prior to that, the latest consumer confidence report is due out Tuesday after the index hit a six-month low in May. June's index is expected to tick higher.
The eurozone is to release preliminary inflation data for June on Friday. And while the headline rate of inflation is expected to moderate, underlying inflation is expected to tick higher, underlining the challenge facing the ECB.
ECB President Christine Lagarde struck a more hawkish tone than expected following the bank's most recent policy meeting, reiterating that rates would need to be increased again in order to bring inflation down to the ECB's 2% target and that they "will be kept at those levels for as long as necessary."
Traders are now betting on a July hike by the ECB and expect another move by October that would bring rates to 4%.
Investors will get a chance to hear from Lagarde, along with Fed Chair Jerome Powell and other global central bank heads, at a panel discussion at the ECB’s annual forum in Sintra, Portugal on Wednesday. Inflation is likely to be front and center during that exchange.
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