Gold prices traded in a narrow range during Thursday’s trading session as investors’ attention shifted to US economic data that could provide further insights into when the Federal Reserve might implement interest rate cuts.
US Economic Data in Focus
US weekly jobless claims data is due for release at 12:30 PM GMT today. The University of Michigan Consumer Confidence Index is due out on Friday. Consumer price data is scheduled for release next week.
Gold Traders Cautious
Despite market expectations for an interest rate cut in September, gold traders are cautious about making big moves. “If the US inflation report comes in hotter, prices could drop to $2290.”
According to the available US Interest Rate Tracker tool, traders currently expect a roughly 66% chance that the Fed will cut rates in September. Lower interest rates reduce the opportunity cost of holding bullion.
“Recent upside surprises in economic activity and inflation suggest the need to keep policy on hold until policymakers have greater confidence that inflation is sustainably moving towards its 2% target,” said Boston Fed President Susan Collins.
Looking ahead to the rest of 2024, the gold outlook remains relatively positive. There is a chance that gold could break above $2500, especially if economic conditions remain uncertain and geopolitical tensions persist.
Gold and the Dollar Now
Gold futures are now down 0.1% to $2319 an ounce. Spot gold is up about 0.2% to $2313 an ounce. On the other hand, the dollar index is up about 0.08% to 105.515 points.
Other Metals
Meanwhile, spot silver rose 0.7% to $27.53 an ounce.
“The long-term outlook for silver remains positive,” said Kedia. “It could rise to $30 in the fourth quarter.”
Platinum rose 0.8% to $982.10 and palladium gained 0.5% to $956.13.
Oil Prices Rise for the Second Session in a Row
Crude oil prices made clear gains during Thursday’s trading, continuing their upward trajectory for the second consecutive session amid energy market optimism about a recovery in global demand for crude, which was clearly reflected in today’s oil price movements.
Key Factors Supporting Oil Prices
Several factors contributed to the upward momentum of oil prices during trading, the most prominent of which can be summarized in the following points:
First: China’s Crude Oil Demand Rebounds
Official data released this morning revealed that China’s crude oil imports rose year-on-year in April, as refineries prepared for the fully utilized Labor Day holiday travel season. Crude oil imports to the People’s Republic rose 5.45% to 44.72 million metric tons or about 10.88 million barrels per day.
State media acknowledged that the number of travelers increased by more than 1.3 billion road trips during the five-day Labor Day holiday, up 2.1% from the same period last year.
These developments have helped to strengthen market expectations for a recovery in Chinese crude oil demand, as China is the world’s largest oil importer, which ultimately had a positive impact on crude trading.
Second: US Oil Demand Recovers
The US Energy Information Administration showed a decline in US oil inventories last week by 1.4 million barrels, better than market expectations of a decline of only one million barrels, following the large increase in oil inventories the previous week, which exceeded 7 million barrels, meaning that US oil demand began to see some recovery last week, which cast a positive shadow on crude oil movements today.
These positive factors coincide with the upcoming meeting of the OPEC+ alliance led by Russia, amid expectations that the voluntary crude oil production cuts will be extended again.
Sterling Under Pressure Ahead of BoE Decisions
Sterling fell in the European market on Thursday against a basket of global currencies, continuing its losses for the third consecutive day against the US dollar, moving away from its three-week high as corrective selling and profit-taking continued, in addition to risk aversion, ahead of the monetary policy decisions at the end of the Bank of England’s regular meeting. Interest rates are widely expected to remain unchanged in the UK for the sixth consecutive meeting, but further evidence of a UK rate cut in June is likely to be released.
Bank of England
The Bank of England has a history of being cautious about raising interest rates, even when inflation is rising. However, recent statements from the Governor and Deputy Governor suggest that they may be more willing to cut rates in the near future.
This could be due to a number of factors, such as the slowdown in the UK economy or the war in Ukraine. It is also possible that the Bank of England is concerned about the impact of higher interest rates on household debt.
Whatever the reasons, the prospect of a rate cut is likely to be welcomed by businesses and consumers. However, it is important to note that this is just speculation, and there is no guarantee that the Bank of England will cut rates. The decision will depend on the latest economic data and the Bank’s assessment of the risks and benefits of a rate cut.
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Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances, or needs.
