Gold prices rose marginally on Thursday as both the dollar and Treasury yields declined following optimistic U.S. economic data, fueling expectations that the Federal Reserve will likely implement interest rate cuts later this year.
At 10:30 a.m. ET (1430 GMT), spot gold rose by 0.4 per cent to $2,348.36 per ounce, while U.S. gold futures saw a 0.2 per cent increase to $2,345.40.
“Gold prices faced strong resistance in the range of $2,340-$2,350 in Comex and ₹72,200- ₹72,500 in MCX. Indications of “higher for longer” interest rates boosted the dollar, which rose above 105, putting pressure on gold prices and leading to profit booking and increased volatility. The upcoming PCE price index release on Friday is expected to be a key trigger for price movements, as inflation remains a significant concern,” said Jateen Trivedi, VP Research Analyst – Commodity and Currency, LKP Securities.
What’s behind the rally?
The dollar retreated by 0.4 per cent following a surge to a two-week peak earlier, which increased the appeal of gold for holders of other currencies.
U.S. Treasury yields declined subsequent to data revealing a slower growth rate for the world’s largest economy in the first quarter than previously estimated.
Concurrently, U.S. jobless claims saw an increase in the latest reporting period.
Attention is now directed towards the release of the Personal Consumption Expenditures (PCE) price index on Friday, serving as the Federal Reserve’s favored gauge of inflation. This data could offer further insights into the timing of potential interest rate cuts by the Fed.
As per the CME FedWatch Tool, traders currently assess approximately a 52 per cent probability of a Fed rate reduction by September. Lower interest rates diminish the opportunity cost associated with holding gold, which does not yield interest.
“Commodities basket as whole is trading in the negative territory, weighed by a stronger U.S. dollar as traders prefer to stay in lighter positions ahead of the U.S. GDP data later in the day and inflation numbers from Euro zone and U.S. tomorrow, which may give some clues on the timing rate cuts of the respective central banks. The market has been pricing in a rate from the European Central Bank next month, while the U.S. Fed is expected to keep delaying the rate cuts,” Pranav Mer, Vice President, EBG – Commodity & Currency Research, JM Financial Services Ltd.
On the other hand, silver dropped by 1.3 per cent to $31.54 following its peak of over 11 years last week. Meanwhile, platinum increased by 0.1 per cent to $1,037, while palladium declined by 0.9 per cent to $957 after hitting a four-week low earlier in the session.
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Published: 30 May 2024, 10:10 PM IST
