Gold Recovers from Two-Week Low as Focus Shifts to Inflation

On Monday, gold prices rose from a two-week low, with traders assessing diminishing expectations of US interest rate cuts before the upcoming inflation report.

The yellow metal’s futures ending in June surged by 0.43% to $2,344.45 per troy ounce, while spot gold climbed by 0.41% to $2,343.52 per troy ounce.

The bullion reached a record high of $2,449.89 last week but has dropped by over $100.00 since that peak.

Analysts project gold might bounce slightly from its present levels before potentially revisiting the $2,280.00 to $2,300.00 range. However, extended losses in that zone are possible if US data continue to outperform expectations.

Meanwhile, the core personal consumption expenditures (PCE) price index, favored by the US Federal Reserve (Fed), is expected on Friday. While bullion is an inflation hedge, higher rates elevate the opportunity cost of holding non-yielding yellow metal.

Experts noted that as bullish investors face setbacks at peak levels, prompting some to liquidate holdings and others to adopt a bearish outlook, the prospect of new highs appears unlikely.

Indeed, this rings particularly true as the Fed remains committed to its ‘higher-for-longer’ position regarding interest rates.

Meanwhile, published minutes from the regulator’s recent meeting revealed that the central bank’s journey toward achieving 2.00% inflation might take longer than initially anticipated.

PCE Test Looms as Gold Batters by Fading Rate Cut Forecasts

This week’s focal point has been the PCE price index data, the Fed’s preferred inflation gauge, with the reading set for release on Friday.

Following numerous cautions from Fed officials regarding persistent inflation, traders have mostly discounted the likelihood of rate cuts by the central bank this year.

Reports show that regulators are now assigning a higher probability to the Fed maintaining unchanged rates in September, a period previously seen as the most probable for a rate cut.

Meanwhile, the concept has recently exerted downward pressure on gold and other metal prices as traders increasingly favor the dollar and Treasuries.

Additionally, diminishing demand for gold as a haven asset has further dampened its value.

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