Gold inches higher amid rate cut bets

Bengaluru — Gold prices edged higher on Wednesday after softer US retail sales data boosted the expectation that the Federal Reserve will cut interest rates in 2024.

Spot gold was up 0.1% at $2,331.17/oz by 3.18am GMT. US gold futures fell 0.1% to $2,345.60.

Data released on Tuesday showed US retail sales barely rose in May, suggesting that economic activity remained lacklustre in the second quarter.

“Weaker treasury yields overnight and subdued moves around the US dollar following a disappointing US retail sales read seem to offer room for some relief in the yellow metal,” said IG market strategist Yeap Jun Rong.

“While US policymakers have guided for only one rate cut through 2024, market rate expectations are leaning more dovish, which seems to be finding validation from pockets of economic weakness presented. Further economic weakness may offer a lift for gold prices.”

Lower interest rates reduce the opportunity cost of holding non-yielding bullion.

With recent data showing a moderation in the labour market and price pressures, the Federal Reserve is looking for further confirmation that inflation is cooling.

Market focus is now on the weekly jobless claims data on Thursday and flash purchasing managers indices on Friday.

Gold prices have entered a consolidation phase after hitting a record high of $2,449.89 on May 20.

On June 7, data showed that China’s central bank paused gold purchases for its reserves in May after 18 months of buying, sending bullion to its biggest daily drop since November 2020.

“Central bank buying of gold took a breather in May and any continuation of this trend poses a risk to the pace of upside momentum in the gold price,” Tim Waterer, chief market analyst at KCM Trade, said in a note.

Spot silver was down 0.1% at $29.49/oz, platinum rose 0.1% to $973.86 and palladium gained 0.2% to $888.91.

Reuters