Gold prices rose during today’s trading, Wednesday, supported by the stability of the dollar index as investors look to the minutes of the last monetary policy meeting of the Federal Reserve (the US central bank) scheduled to be released later today for more clarity on the interest rate path.
According to specialists at Bank of America, gold prices could rise by about 50% if central banks increase their purchases or if the global economy enters a deep recession, reaching $3,000 an ounce in about a year.
According to a small majority of economists polled by Reuters, the Federal Reserve is likely to cut the federal funds rate in June. However, the bigger risk is that the first rate cut will come later than expected rather than sooner.
Despite the “significant” progress in inflation in the United States, San Francisco Federal Reserve President Mary Daly said that “there is more work to be done” to ensure price stability. At the same time, another Fed official warned against delaying rate cuts for too long.
Gold and the Dollar Now
Gold futures settled at $2,040 an ounce. Spot gold rose 0.21% to $2,028 an ounce. On the other hand, the dollar index is stable at 103.977 points.
Other Metals
Platinum rose 0.1% in spot trading to $901.50 an ounce. Palladium rose 0.2% to $977.05. Silver fell 0.1% to $22.97 an ounce.
Oil Prices Fall Amid Demand Concerns
Oil prices fell, weighed down by concerns about weak global demand, which affected the support that prices received from the war between Israel and the Islamic Resistance Movement (Hamas).
US crude oil fell to $76.73. Brent crude fell to $81.30 a barrel.
The United States on Tuesday used its veto power for the third time against a UN Security Council resolution on the ongoing war between Israel and Hamas, blocking a call for an immediate ceasefire for humanitarian reasons. The United States is pressing the 15-member council to call for a temporary ceasefire linked to the release of hostages held by Hamas.
The shipping sector has been hit hard as the Houthis have stepped up their attacks on shipping lanes in the Red Sea and the Bab al-Mandab Strait in solidarity with the Palestinians. At least four ships have been hit by drone strikes and missiles since Friday. Despite the conflict in the Middle East, a major oil-producing region, investors appear increasingly concerned about weak global demand.
A report by the International Energy Agency last week revised down its forecast for oil demand growth in 2024 to about 1 million barrels per day, below the forecast of the Organization of the Petroleum Exporting Countries (OPEC). The IEA estimates that global oil demand will grow by 1.22 million barrels per day this year, while OPEC’s forecast for growth is 2.25 million barrels per day.
Dollar Falls After Global Bond Yields Decline in Anticipation of US Central Bank Minutes
The dollar fell broadly on Wednesday, weighed down by a decline in global Treasury yields, as traders await the minutes of the latest Federal Reserve policy meeting due later Wednesday for further clues on the central bank’s interest rate outlook.
Against the yen, the US currency fell below 150 in Asian trading, and was last trading at 149.97 yen, giving the Japanese currency some breathing room after it had been near a three-month low in previous sessions.
The dollar’s decline came as US Treasury yields fell in line with their global counterparts. The minutes of the latest FOMC meeting, to be released later today, will provide further clues on the interest rate outlook.
Australian Wage Price Index Falls at Fastest Pace Since 2009!
The Australian Bureau of Statistics released the Australian Quarterly Wage Price Index data early Wednesday, which showed the index rose 0.9% in the fourth quarter of 2023, as wage growth in the country slowed at the fastest pace since the first quarter of 2009.
The Wage Price Index is a leading indicator of inflation or the Consumer Price Index. When companies pay more for workers, these higher costs are passed on to consumers. The index measures the change in business and government payments to employees – excluding bonuses – on a quarterly basis.
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