Gold rises from a two-week low as rate cut hopes fade

by Jonathan Adams
Gold futures

Spot gold was 0.4% higher at $2,342.73 per ounce, having reached its lowest level since May 9 at $2,325.19 on Friday

Gold prices inched higher on Monday from a two-week low touched in the previous session as traders gauged fading hopes of U.S. interest rate cuts ahead of a key inflation report due later this week.

Spot gold was 0.4% higher at $2,342.73 per ounce, as of 0543 GMT, having reached its lowest level since May 9 at $2,325.19 on Friday. U.S. gold futures also jumped 0.4% to $2,343.60.

Bullion reached a record high of $2,449.89 earlier last week, but has declined more than $100 since then.

I suspect gold can manage a small bounce from current levels before retesting the $2,280-$2,300 zone, which could see losses extended if U.S. data continues to outperform, according to City Index senior analyst Matt Simpson.

The core PCE price index, the preferred inflation measure for the U.S. Fed, is due on Friday.

Bullion is known as an inflation hedge, but higher rates increase the opportunity cost of holding non-yielding gold.

With bullish fingers being burned at the highs and forcing some to liquidate and others to switch to the bear-camp, I doubt we’ll see a new high soon with the Federal Reserve maintaining their ‘higher-for-longer’ narrative with interest rates, Simpson added.

Minutes from the Fed’s meeting published last week showed the central bank’s path to 2% inflation could take longer than anticipated.

Traders’ bets suggested growing scepticism that the Federal Reserve will reduce rates more than once this year, currently pricing in nearly a 62% probability of a rate reduction by November, as per the CME FedWatch Tool.

As per Reuters technical analyst Wang Tao, spot gold may test resistance at $2,352 per ounce, a break above could open the way towards $2,363.

Gold demand in India marginally improved last week after prices corrected from a record high, but retail purchases stayed lower than normal, prompting dealers to widen discounts.

Disclaimer: The opinions expressed by our writers are their own and do not represent the views of Trading and Investment News. The information provided on Trading and Investment News is intended for informational purposes only. Trading and Investment News is not liable for any financial losses incurred. Conduct your own research by contacting financial experts before making any investment decisions.

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