GOLD Price Retreats on US Dollar Rebound Ahead of Key Data / FED
After Thursday's 1% rally, the price of gold continued to climb early Friday before pulling back from its five-day highs. This retreat was driven by end-of-week flows and position adjustments, as market participants prepared for the release of top-tier US economic data, including the Consumer Price Index (CPI), and the Federal Reserve's policy announcements. Although the US dollar rebounded on Friday, it closed the week in negative territory for the second consecutive time, providing some support for the price of gold.
The US dollar tracked a minor rebound in US Treasury bond yields, but buyers in the bond market remained active due to concerns about the economy and expectations of a possible pause in the Federal Reserve's interest rate hikes. Market expectations indicate a 76% probability that the Fed will maintain the federal funds rate in the 5.00%-5.25% range after its two-day meeting ends on Wednesday. Recent disappointing economic data from the US, including the ISM Services PMI and jobless claims, have raised hopes of a potential halt in the tightening cycle by the Federal Reserve.
At the start of the week, the price of gold remains vulnerable as the US dollar consolidates its gains from Friday amid a cautiously optimistic market sentiment, with investors gearing up for key events and risks ahead. The release of US CPI data on Tuesday will be closely watched, with expectations of a 4.2% increase in the headline annual CPI figure for May, lower than the 4.9% growth recorded in April. The Core CPI figure, which excludes volatile food and energy prices, is expected to rise 5.6%, slightly faster than April's 5.5% growth. The monthly Consumer Price Index is forecasted to increase by 0.2% in May, compared to a 0.4% increase in the previous month. However, the Core CPI is expected to rise by 0.4%, matching the pace of the previous month.
This data release, occurring a day before the Fed's decision, is expected to have a significant impact on the Fed's interest rate outlook. Eric Rosengren, former President of the Boston Federal Reserve Bank, tweeted early Monday that he expects the Fed to take a hawkish pause on Wednesday, indicating that the central bank will keep the possibility of further tightening later this year open.
Gold price also faces pressure due to reports of slowed physical demand in China and India, leading to dealers offering discounts. Volatile prices in India have caused buyers to delay purchases. Additionally, the price of gold remains within a bearish channel, prompting us to look for short opportunities.
The US dollar tracked a minor rebound in US Treasury bond yields, but buyers in the bond market remained active due to concerns about the economy and expectations of a possible pause in the Federal Reserve's interest rate hikes. Market expectations indicate a 76% probability that the Fed will maintain the federal funds rate in the 5.00%-5.25% range after its two-day meeting ends on Wednesday. Recent disappointing economic data from the US, including the ISM Services PMI and jobless claims, have raised hopes of a potential halt in the tightening cycle by the Federal Reserve.
At the start of the week, the price of gold remains vulnerable as the US dollar consolidates its gains from Friday amid a cautiously optimistic market sentiment, with investors gearing up for key events and risks ahead. The release of US CPI data on Tuesday will be closely watched, with expectations of a 4.2% increase in the headline annual CPI figure for May, lower than the 4.9% growth recorded in April. The Core CPI figure, which excludes volatile food and energy prices, is expected to rise 5.6%, slightly faster than April's 5.5% growth. The monthly Consumer Price Index is forecasted to increase by 0.2% in May, compared to a 0.4% increase in the previous month. However, the Core CPI is expected to rise by 0.4%, matching the pace of the previous month.
This data release, occurring a day before the Fed's decision, is expected to have a significant impact on the Fed's interest rate outlook. Eric Rosengren, former President of the Boston Federal Reserve Bank, tweeted early Monday that he expects the Fed to take a hawkish pause on Wednesday, indicating that the central bank will keep the possibility of further tightening later this year open.
Gold price also faces pressure due to reports of slowed physical demand in China and India, leading to dealers offering discounts. Volatile prices in India have caused buyers to delay purchases. Additionally, the price of gold remains within a bearish channel, prompting us to look for short opportunities.
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