Gold Strengthens, But Still Heading for Weekly Weakness
Gold prices strengthened on Friday (June 26th) as the US dollar weakened and expectations of a Fed interest rate hike eased following the release of inflation data. However, the precious metal remains on track for its fourth consecutive weekly decline.
Spot gold prices rose 1.2% to US$4,073.78 per troy ounce. Meanwhile, US gold futures for August delivery also rose 1.2% to US$4,096.30 per troy ounce.
The US dollar weakened from its recent high after the release of Personal Consumption Expenditures (PCE) inflation data on Thursday. US PCE rose 4.1% in the 12 months to May, in line with economists' forecasts. With no inflation surprises higher than expected, pressure on gold has eased.
The market now rates the chance of a US interest rate hike in September at around 60%, down from the previous expectation of around 64%. The reduced odds helped gold rebound, as higher interest rates typically dampen the appeal of non-yielding precious metals.
American Gold Exchange market analyst Jim Wyckoff said gold is experiencing a moderate rebound after experiencing selling pressure at the start of the week. Previously, gold prices had touched their lowest level in more than seven months due to a strong dollar and expectations of high interest rates.
Despite strengthening on Friday, gold is still down around 2.6% for the week. This weekly pressure indicates that the market has not completely recovered from its bearish sentiment, especially as the Fed is still likely to maintain a tight policy as long as inflation has not returned to its 2% target.
TD Securities believes that gold's negative relationship with the US dollar and oil prices remains a concern. If energy prices strengthen again sustainably, inflationary pressures could increase and push the Fed to remain hawkish. This situation has the potential to put new pressure on gold in the coming months.
In terms of physical demand, gold has begun trading at a premium in India for the first time in a month and a half. The previous price correction encouraged buying in the Indian market. However, demand in China, the largest gold consumer, remains weak. Given these conditions, the current gold rebound still appears more like a technical recovery than a major trend change. To continue its rally, gold needs sustained dollar weakness, declining Treasury yields, and a signal that the Fed will not raise interest rates aggressively.
Source: Newsmaker.id
