Gold awaits inflation report

31 Mayıs 2024

Today’s market analysis on behalf of Antonio Ernesto Di Giacomo – Market Analyst Latam at xs.com

The price of gold remained relatively stable this Thursday, May 30, 2024, fluctuating between $2340 and $2350 per ounce. This behavior reflects the caution of investors awaiting the following U.S. inflation report. The anticipation surrounding this data is high, as it significantly impacts monetary policy and, consequently, the value of gold.

Since its all-time high of $2,450 per ounce reached on May 20, the price of gold has fallen by more than 4.20%. This decline has been influenced by comments from the Federal Reserve (Fed) indicating a longer path towards the 2% inflation target. The Federal Reserve has pointed out that although inflation has shown some signs of slowing, inflationary pressures persist, justifying a more cautious approach to reducing interest rates.

Higher interest rates increase the cost of holding gold, an asset that does not generate interest. According to the CME FedWatch, rate cuts in November are a 59% probability. However, this probability remains subject to upcoming economic data, especially inflation-related ones. Investors are attentive to any indications that could alter this outlook and affect the gold market.

Two senior Fed officials, Raphael Bostic and Neel Kashkari, have highlighted the persistence of inflationary pressures. Both have stated that it is necessary to delay rate cuts until a significant improvement in inflation indicators is observed. Their statements reinforce the expectation that the Fed will maintain a vigilant and prudent stance, which directly influences investors’ perceptions of the future value of gold.

In conclusion, gold is in a state of anticipation, influenced by investor caution ahead of the upcoming U.S. inflation report. The recent decline in its price reflects expectations regarding the Federal Reserve’s monetary policy and statements from its officials. As new vital dates approach and more economic data is revealed, the gold market will continue to adjust to these signals, maintaining its role as a safe haven in economic uncertainty.

 

Zaid Barem / YMM