Prospects of an aggressive Fed rate-hike path cause gold to decline

3 Jul 2023 , 11:42 AM

Spot gold had down by 0.1% to $1,917.19 per ounce, while U.S. gold futures had decreased by 0.2% to $1,925.10.

On forecasts of a longer Fed rate hike path in the coming months, gold prices closed June 2.2% down and fell 2.5% for the second quarter.

The dollar index maintained its close proximity to the two-week high reached on Friday, making gold more expensive for owners of other currencies.

The Federal Reserve’s preferred core PCE price index, which excludes food and energy, rose 4.6% on an annual basis in May after rising 4.7% in April, despite the fact that U.S. consumer expenditure remained flat in May.

According to CME’s Fedwatch tool, investors price in a second 25 bps rate hike in November, which would raise rates to a range between 5.5% and 5.75% before decreases are anticipated in 2024.

On July 5, the minutes of the FOMC meeting from June 13–14 will be made public.

High-interest rates deter investment in gold that doesn’t yield.

Although the second quarter in Japan saw an improvement in economic conditions, June saw a decline in factory activity.

In the United States, the Institute of Supply Management’s (ISM) countrywide PMI report is anticipated, however, due to a U.S. holiday on July 4, trading volume on Monday may be low.

Spot silver was unchanged at $22.74 per ounce, platinum dropped to $900.19, and palladium increased to $1,232.06, all by a negligible 0.1%.

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