Gold prices saw a modest increase on Monday as a weakened dollar made bullion more appealing to international investors. However, prices continued to hover near three-month lows as traders evaluated the possibility of additional interest rate hikes by the U.S. Federal Reserve. Spot gold rose by 0.2% to $1,925.99 per ounce, while trading gold futures were up 0.3% at $1,936.00. Bullion had experienced a decline of nearly 2% the previous week due to hawkish comments from Fed officials indicating potential rate hikes to control persistent inflation. The prospect of higher interest rates diminishes the attractiveness of non-yielding gold.
Traders Assess Prospects of More Interest Rate Hikes by the Federal Reserve
According to OCBC FX strategist Christopher Wong, the current price action reflects the expectation that the tightening cycle is approaching its end, but there remains a risk of extension, contributing to the subdued prices. Investors are now anticipating a 72% chance of a rate hike in July, with rate cuts potentially occurring from 2024 onwards, based on CME’s Fedwatch tool. The dollar index also saw a marginal 0.2% decrease.
Despite the downward trend, Citi analysts noted that strong physical consumption from central banks and China, along with recession tail hedging, have partially offset the decline. Speculators increased their net long position in COMEX sell gold bullion by 1,322 to 94,626 in the week ending June 20, as per CFTC data.
In addition to gold per kg price, other precious metals also experienced some upward movement. Spot silver and platinum both rose by 1.3% to $22.71 per ounce and $928.86, respectively. Palladium, used in auto-catalysts, increased by 0.5% to $1,291.05.
Mixed Concerns of Russia and China Pose Challenges for Scrap Gold Prices
The trading gold market is currently facing challenges amid mixed concerns related to Russia and China, as well as upcoming inflation signals and central bankers’ speeches. The XAU/USD price struggles to maintain a corrective bounce following its recent three-month low. Worries about downward revisions of China’s growth forecasts, geopolitical actions by Russia, and the potential for prolonged high-interest rates, along with positive US PMIs, are hindering gold buyers. The focus will primarily be on inflation clues and geopolitical news to determine the market direction. Technical analysis suggests a gradual movement toward the key resistance level at $1,951.