Gold Continues to Fall Against a Strong Dollar

Gold prices fell slightly in Asian trading on Wednesday, extending losses from the previous session as traders remained largely dollar-biased ahead of key US inflation data. The yellow metal is also stuck in a trading range – around the low end of $2,300 an ounce – that has been in place for most of June, as the prospect of higher US interest rates has weighed on price expectations.

Gold prices range-bound ahead of PCE release

The yellow metal has been trending lower this week, with trading volumes remaining subdued as markets await the core inflation data, the PCE price index, due out this week.

The reading, due out on Friday, is the Fed’s preferred inflation gauge and is likely to be a factor in the central bank’s interest rate expectations.

Recent signals of resilience in the US economy – from strong PMI data to consumer confidence readings – have raised concerns that the Fed will have enough room to keep interest rates higher for longer. Several Fed officials have echoed this view this week.

A revised first-quarter GDP reading is also due out this week, providing further insight into the US economy.

Other precious metals rose on Wednesday, although gains were muted on concerns that higher interest rates for longer will weigh on prices in the coming months. The strength of the dollar, which remained near two-month highs, also weighed on metal prices.

Spot gold XAUUSD

Gold fell 0.1% to $2,317.02 an ounce, while August gold futures fell 0.1% to $2,328.40 an ounce.

Platinum futures

The price per ounce rose 0.6% to $1,005.25, while silver futures rose 0.2% to $29.258.

Subdued copper prices amid China’s caution

Among industrial metals, copper prices traded sideways on Wednesday and were nursing sharp losses during June amid growing caution over China, the largest importer.

The London Metal Exchange (LSEG) copper index fell 0.1% to $9,561.50 a tonne, while on-exchange copper was flat at $4.3695 a pound. The prospect of a trade war between China and the West has weighed on copper sentiment, especially after hefty tariffs were imposed on Chinese electric vehicle imports into the EU and the US.

The tariffs also signal further headwinds for the electric vehicle industry, which is expected to be a major source of copper demand in the coming years.

“Middle East” risks push oil back up

Oil prices rose in Asian trading today, Wednesday, despite a surprise jump in US inventories, driven by geopolitical risks from the Middle East conflict and expectations of eventual inventory draws during the peak demand season in Q3.

Geopolitical risks are escalating with Houthi attacks in the Red Sea and escalating hostilities between Israel and Hezbollah in Lebanon also pushing oil prices higher.

Crude oil futures rose during the Asian session on Wednesday. According to the New York Mercantile Exchange, August crude oil futures were trading at USD81.19 per barrel as of this writing, up 0.45%. The session high was USD81.19 per barrel. Crude oil may find support at USD80.23 and resistance at USD82.41.

The Dollar Index futures contract, which measures the performance of the US dollar against a basket of six other major currencies, fell 0.05% to trade at USD105.31.

Meanwhile, on Nymex, September Brent oil rose 0.42% to trade at USD84.57 per barrel, while the spread between Brent and crude oil futures stands at USD3.38 per barrel.

Important Fed statements… and a “no cuts in 2024” surprise

Federal Reserve member Michelle Bowman on Tuesday reaffirmed her view that keeping the current interest rate “for a longer period” would be enough to get inflation under control, but she also signaled her willingness to raise borrowing costs if necessary.

Bowman: No cuts in my view

“Inflation in the US is still high, and I still see a number of upside risks to inflation that are affecting my expectations,” Bowman said in prepared remarks delivered in London.

During a Q&A session after her speech, Bowman, when asked if she did not expect any rate cuts in 2024, said:

“Yes, that’s my view, I haven’t written any further rate cuts into my economic statement for most of this year,” Bowman said, referring to the forecasts anonymously provided by Fed officials at the central bank’s most recent policy meeting earlier this month.

Bowman Reiterates Hawkish Stance, Sees Limited Progress on Inflation

Federal Reserve Governor Michelle Bowman remains one of the most hawkish voices on the central bank, and her remarks on Tuesday were no exception. Earlier this month, the Fed kept its benchmark interest rate in the 5.25%-5.5% range where it has been since last July. The new projections showed that none of the Fed policymakers expect to raise rates from here, and their median projection was for just one cut before the end of the year.

“Going forward, I will be watching the incoming data closely to assess whether monetary policy in the United States is restrictive enough to bring inflation down to our 2% target over time,” Bowman said. “So far this year there has been only ‘limited progress’ on inflation. And I expect inflation to remain elevated for some time.”

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.

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